Federal Reserve Chairman Jerome Powell testifies during a hearing before House Financial Services Committee.
Alex Wong/Getty ImagesThe Dow Jones Industrial Average was sliding, and a hawkish Federal Reserve is getting the blame. Some of the blame, however, might be misplaced.
There’s no doubt the stock market has been weak after initially soaring following the Fed’s meeting this week, and it’s easy to blame the declines on a delayed reaction to the central bank’s plan to tighten liquidity at a faster pace.
On Friday, the Dow Jones Industrial Average was off 487 points, or 1.4%, while the S&P 500 fell 0.9%, and the Nasdaq Composite was down 0.3%.
There’s no doubt that investors should be concerned about central bankers’ hawkish tilt, after the Federal Reserve’s decision Wednesday to accelerate the end of quantitative easing and to pencil in three interest-rate increases for next year, and the Bank of England’s own rate increase from 0.1% to 0.25%, finally caught up with investors.
Other banks, however, are taking it far more easy. The Central Bank of Japan Friday seemed to side with the European Central Bank by striking an overall dovish tone, even as it announced it would pull back some of its emergency Covid-19 pandemic funding. Governor of the Bank of Japan Haruhiko Kuroda insisted that monetary stimulus would continue, and that borrowing costs would remain low in the months to come.
“Inflation risks have become too big an elephant in the room to ignore by central banks (…) The main difference between them is how much of a downside risk they attach to the current developments of the pandemic,” ING analysts wrote.
But sometimes markets can move because of internal factors rather than anything fundamental, and that may be the case now, said NatAlliance Securities’ Andrew Brenner. Friday, he noted, is “quadruple witching,” the term for when stock options, stock-index futures, single-stock futures, and index options all expire on the same day. On these days, market makers are forced to hedge positions, which can create feedback loops that drive stocks lower. “Equities are being moved by gamma and quadruple witching today,” Brenner wrote, using the term for an option’s sensitivity to changes in delta, the change in an options price relative to the change in the underlying asset’s price. “There is zero fundamental news that would make stocks go down. [It’s] certainly not rates …[not] inflation.”
And while tech stocks were off their worst levels of the day, most stocks were still down. Just over half of the stocks on the S&P 500 were lower, according to FactSet, and 26 of the Dow components were down.
Asian stocks were nearing 13-month lows Friday, with Japan’s Nikkei 225 index closing down 1.8%, and Hong Kong’s Hang Seng Index and the Shanghai composite both down 1.2%.
European markets followed the general trend, with the pan-European Stoxx 600 index down 0.5%.
Oil prices were falling, with U.S. crude losing 1.1% to $71.29 a barrel.
Here are six stocks on the move Friday:
Shares in electronic-medical records company Cerner (ticker: CERN) jumped 12%, after The Wall Street Journal reported that software maker Oracle (ORCL) was in talks to acquire the company in a deal that would value it at around $30 billion. Oracle stock dropped 5.5%.
U.S. delivery group FedEx (FDX) was up 5.5% as the company reinstated its original 2022 fiscal forecast after easing concerns about labor shortages.
Shares in Rivian (RIVN) were falling 13% after the electric-vehicle company acknowledged, in its first results presentation since listing, that expected production this year would fall short of target, and disappointed investors with preorder numbers below forecast.
U.S. Steel (X) was down 1.6%, after publishing lower-than-expected fourth-quarter guidance for its earnings before interest, taxes depreciation and amortization.
Tesla (TSLA) rose 2% after Elon Musk sold more shares.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com, Pierre Briançon at pierre.briancon@dowjones.com and Ben Levisohn at ben.levisohn@barrons.com
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December 17, 2021 at 11:23PM
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Stock Market Today: Dow Drops, Oracle Tumbles - Barron's
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