S&P 500 Slips as Caution Sets in Ahead of Inflation Report

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S&P 500 Slips as Caution Sets in Ahead of Inflation Report
Credit: © Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 slipped Thursday following a three-day rally as investors weighed up positive labor market data ahead of Friday's inflation report that could intensify expectations for a faster pace of Federal Reserve monetary policy tightening.

The S&P 500 fell 0.71%, the Dow Jones Industrial Average was flat, the Nasdaq fell 1.7%.  

"The broader market is taking a breather after the run up over the last four days going into tomorrow's consumer price index report," David Wagner, portfolio manager at Aptus Capital Advisors told Investing.com in an interview on Thursday.

Economists forecast that the CPI Index for November rose 6.8%, up from 6.2%, led by a sharp increase in rising rents. That would the fastest pace of inflation since 1990.

"We're looking at a lot of different REITs and a lot of different apartment companies, and seeing rental growth for those types of companies of about 10%," Wagner added. "Rising rental rates will lead to a CPI reading that's going to be higher than expected and more importantly, it's going to be longer than expected."

Federal Reserve Chairman Jerome Powell signaled last month that the Fed would consider stepping up the pace of bond purchasing tapering to curb inflation pressures.

On the jobs front, data continued to show an improving labor market as jobless claims fell to 184,000, the lowest in more than 52 years.  

Energy was the biggest drag on the broader market as oil prices fell 2% on concerns that fresh restrictions in Europe could weigh on the travel, and energy demand, albeit not as much as initially feared.

"Oil demand is unlikely to escape completely unscathed, though the effects [from the restrictions] will probably not be nearly as serious as initially feared," Commerzbank said in a note.

Diamondback Energy Inc (NASDAQ: FANG ), Williams Companies (NYSE: WMB ), and Devon Energy (NYSE: DVN ) led the move to the downside in energy.

Technology, meanwhile, was pressured by weakness in semiconductor stocks, paced by a 5% decline in Wolfspeed (NYSE: WOLF ) and Advanced Micro Devices (NASDAQ: AMD ).

Apple (NASDAQ: AAPL ) gave up some gains, though Wall Street continues to talk up further growth ahead for the tech giant amid expectations for strong iPhone demand and new production launches.

"We believe the risk/reward is very favorable at current levels for this "safety blanket" tech stalwart," Wedbush said. Demand for Apple's iPhone 13 is outpacing supply by "about 10 million units globally," it added.

Health care, meanwhile, added to gains from a day earlier as CVS Health (NYSE: CVS ) soared to a record high after the drugstore chain said sales were set to strengthen, underpinned by its expansion of health-care services.

In other news, GameStop (NYSE: GME ) fell more than 10% after the video game retailer reported third-quarter losses than were wider than expected and failed to provide update on strategy to bolster growth.

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