The S&P 500 ended lower on Monday after President Joe Biden picked Federal Reserve Chair Jerome Powell to lead the central bank for a second term, while Wall Street lenders rallied on the prospect of interest rate hikes in 2022.
The Nasdaq (.IXIC) tumbled deep into negative territory after it and the S&P 500 earlier hit record highs, with climbing Treasury yields weighing on Amazon (AMZN.O), Alphabet (GOOGL.O) and other major growth stocks.
Bucking losses in other Big Tech stocks, Apple (AAPL.O) ended at its highest level ever after JPMorgan flagged possible improvements to the supply of the iPhone 13 in coming months.
Powell’s nomination was largely welcomed by investors hoping for no big changes in the Fed as it guides the economy through a recovery from the pandemic. The central bank is set to herald a return to pre-pandemic policy by end-2022.
Fed Governor Lael Brainard, who was the other top candidate for the job, will be vice chair, the White House said.
“Markets like predictability. … While Brainard may have been a fine choice, the markets would not know what to expect from her even though the general consensus was that it meant lower rates for longer,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab in Austin, Texas.
The S&P 500 banks index (.SPXBK) rallied, tracking a surge in Treasury yields as investors priced in policy tightening by the first half of 2022. Wells Fargo & Co (WFC.N) was among the strongest major Wall Street banks.
Futures contracts tied to the Fed’s policy rate indicated that money markets are now expecting the U.S. central bank to raise interest rates by 25 basis points by next June versus a previous estimate of July.
“Financials being up today is pretty much an interest rate story, and tech being down is a rates story too,” said Ross Mayfield, investment strategist at Baird.
According to preliminary data, the S&P 500 (.SPX) lost 15.38 points, or 0.32%, to end at 4,682.88 points, while the Nasdaq Composite (.IXIC) lost 202.68 points, or 1.26%, to 15,854.76. The Dow Jones Industrial Average (.DJI) rose 17.28 points, or 0.05%, to 35,617.83.
The S&P 500 value index (.IVX) strongly outperformed the S&P 500 growth index (.IGX).
Investors were awaiting a slew of economic data this week, including IHS business activity readings, personal consumption expenditure, and minutes of the Fed’s latest meeting.
Amazon and Alphabet declined, both weighing heavily on the Nasdaq.
Tesla Inc (TSLA.O) gained after CEO Elon Musk tweeted that the Model S Plaid will “probably” be coming to China around March. The stock has almost recovered from a steep selloff earlier this month that started after Musk polled Twitter users about whether he should sell some of his shares in the electric car maker.
Activision Blizzard (ATVI.O) slipped after a media report that the video game publisher’s chief executive, Bobby Kotick, would consider leaving if he could not quickly address concerns about company culture.