Yesterday there was elation when the Fed announced the end of bond buying and the start of rate hikes, all in the interest of taming inflation, something investors very much wanted.  Today the markets took more time to digest the reality that rate hikes would impact the tech stocks and thus there was a sweeping exodus away from tech and back towards value. A more hawkish Fed and continued pandemic fears translates to a lot of uncertainty going into 2022.  The good news is that the S&P is still up 25% for the year and the VIX has dropped to a 3-week low.  Volume came in at 11.9 billion. 

Thu  December 16, 2021  4:36 PM

Nasdaq ends sharply lower as investors dump growth stocks

By Shreyashi Sanyal and Noel Randewich

DJ: 35,927.43  +383.25        NAS: 15,565.58  +327.94       S&P: 4,709.85  +75.76     12/15

DJ: 35,897.64  -29.79            NAS: 15,180.43  -385.15       S&P: 4,668.67  -41.18      12/16

Dec 16 (Reuters) - The Nasdaq ended sharply lower on Thursday as the Federal Reserve's announcement of a faster end to its pandemic-era stimulus pushed investors away from Big Tech and toward more economically sensitive sectors.  Nvidia (NVDA.O) Apple (AAPL.O) Microsoft (MSFT.O), Amazon (AMZN.O) and Tesla (TSLA.O) all tumbled, hitting the Nasdaq (.IXIC) and the S&P 500 (.SPX).  Most of the heavyweight growth stocks have outperformed the broader market in 2021, with Nvidia up more than 100% year to date.

Unofficially, the Dow Jones Industrial Average (.DJI) fell 0.09% to end at 35,893.36 points, while the S&P 500 (.SPX) lost 0.88% to 4,668.45.  The Nasdaq Composite (.IXIC) dropped 2.47% to 15,180.42.

The U.S. central bank said on Wednesday it would end its bond purchases in March and signaled three quarter-percentage-point interest rate hikes by the end of 2022. read more  That pleased investors who have increasingly worried about an inflation spike related to the coronavirus pandemic. But on Thursday it contributed to the sell-off in growth stocks.  The S&P 500 value index (.IVX) climbed, while the growth index fell sharply, reflecting investors' views that high-growth stocks tend to underperform when interest rates rise. The value index includes stocks seen as more likely to do well during an economic recovery.

"You're seeing money come out of growth, as it should. If we are going into an environment where interest rates are going up, growth stocks are going to be less attractive" said Dennis Dick, a trader at Bright Trading LLC.  "There's a lot of uncertainty as we go into 2022... We're going to have a more hawkish Fed that is going to pull away the punch bowl," he said.  Among the 11 major S&P 500 sector indexes, technology (.SPLRCT) slumped, while financials (.SPSY) rallied.

"The Fed gave the market what it wanted, and today I think investors are turning again to pandemic uncertainty, and they're also cautious going into the end of the year," said Lindsey Bell, chief investment strategist at Ally Invest, in Charlotte, North Carolina.  Recent readings on surging producer and consumer prices, as well as the fast-spreading Omicron variant of the coronavirus, have fueled anxiety. The S&P 500, nonetheless, remains up about 25% in 2021 and it is trading near record highs.  The CBOE Volatility index (.VIX), often considered Wall Street's fear gauge, slipped to a three-week low.

Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, remaining at levels consistent with tightening labor market conditions. read more  Separately, a survey showed production at U.S. factories increased to the highest level in nearly three years in November. read more

Lennar Corp (LEN.N)fell after the homebuilder missed analysts' estimates for quarterly profit as pandemic-led supply chain issues pushed lumber costs higher and delayed house deliveries. 

Note: No volume data in today’s report but per the CBOE, 11.9 billion shares were traded.