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Dow, S&P 500 Slide As Fed Chair Powell Cautions on Inflation, Says Taper Plans 'On Track'

Wall Street retreated from fresh record highs Friday as Fed Chair Jerome Powell said the central bank is "on track" to being tapering the pace of its monthly bond purchases.

U.S. stocks reversed earlier gains Friday, while Treasury bond yields jumped higher, after Federal Reserve Chairman Jerome Powell cautioned that inflation pressures are likely to last well into next year.

Speaking as part of a virtual panel discussion hosted by the Bank for International Settlements, Powell said the central bank is "on track" to begin slowing the pace of its $120 billion in monthly bond purchases -- the first of several steps required to start raising benchmark interest rates -- adding that supply chain bottlenecks and energy price increases have created an inflation framework that the Fed's 'patient' approach wasn't designed for.

"Supply constraints and elevated inflation are likely to last longer than previously expected and well into next year, and the same is true for pressure on wages," Powell said. "If we were to see a risk of inflation moving persistently higher, we would certainly use our tools."  

The comments clipped earlier gains for both the Dow Jones Industrial Average and the S&P 500 -- both of which had reached all-time highs earlier in the session, and added to downward pressure on tech shares that pulled the Nasdaq lower in early trading.

The Dow swung more than 100 points after Powell's comments, and is now down 40 points on the session, while the S&P 500 fell 20 points.

The tech-focused Nasdaq Composite, meanwhile, fell 170 points, thanks in part to the Snap warning and another leg higher in benchmark 10-year Treasury note yields, which traded at 1.705% in overseas markets before easing to 1.666%.

Snap shares plunged plunged 24.5%, the most on record, after it forecast weaker-than-expected holiday sales and cautioned that supply chain disruptions would hit advertising spending in the social media sector over months ahead.

Facebook tumbled in sympathy, falling 5.7% to $322.5 each while Twitter  (TWTR) - Get Free Report shares were marked 4.3% lower at $632.55 each. Google parent Alphabet  (GOOGL) - Get Free Report fell 3.3%.

Tesla  (TSLA) - Get Free Report shares hit a fresh record high, and now has a $1 trillion valuation firmly in sight, as investors continue reward the clean-energy carmaker's record third quarter earnings.

Intel Corp.  (INTC) - Get Free Report shares slumped 10.9% after the group reported weaker-than-expected third quarter sales and said profit margins would narrow as it ramps-up new technology chipmaking.

Even with today's weakness, however, global stocks are on pace for their third weekly advance, however, following last night's record high close for the S&P 500 -- 33 days after its last peak in early September -- a series of stronger-than-expected third quarter earnings reports and the lowest level of weekly jobless claims in nineteen months.

Reports of a a surprise $83.5 million coupon payment by indebted property group China Evergrande, just days ahead of a possible default, added to the session's positive tone, although investors are largely looking ahead to next week's busy earnings slate -- highlighted by updates from Apple  (AAPL) - Get Free Report, Microsoft  (MSFT) - Get Free Report, Facebook Amazon  (AMZN) - Get Free Report and Google GOOGL for broader market direction.

In other markets, oil prices climbed higher again Friday, setting up the 8th consecutive week of gains, as OPEC production cuts and China's power crisis continues to boost global crude demand.

The gains have lifted U.S. gas prices to $3.36 per gallon, the highest since 2014, and prompted comments from President Joe Biden during a CNN Town Hall event in Baltimore, Maryland, last night, during which he cautioned that, while they are likely to fall in 2022, he didn't see "anything that’s going to happen in the meantime that’s going to significantly reduce gas prices.”

WTI futures for December delivery were marked 52 cents lower on the session at $83.00 each while Brent contracts for the same month, the global pricing benchmark, rose 39 cents to $85.00 per barrel.