NEW YORK CITY, RAW – Wall Street closed lower on Thursday as investors banked some profits after three straight days of gains and turned their focus toward upcoming inflation data and how it might influence the Federal Reserve’s meeting next week.

The Nasdaq was down more sharply than the S&P 500. Investors were in a waiting game ahead of US consumer prices index (CPI) inflation data due Friday morning. A higher-than-expected reading would strengthen the case for a policy tightening decision at the US central bank’s meeting on December 15.

In the first three days of the week, the Nasdaq rallied 4.7 per cent, the S&P advanced 3.6 per cent and the Dow gained 3.4 per cent as fears abated about the latest coronavirus variant Omicron.

“We had a rip roaring rally. There’s still nervous people out there,” said Dennis Dick, head of markets structure, proprietary trader at Bright Trading LLC in Las Vegas.

“We had a Omicron relief rally but the underlying problem still remains, that the Fed’s taking the punchbowl away.”

Joe Quinlan chief market strategist for the CIO office of Bank of America, said investors may be taking profits and pausing buying after the three days of gains.

“Also there may be a little risk-off trade ahead of the CPI number on Friday,” he said. “If it comes in hotter than expected it really shines the light and the focus on the Fed meeting. The pressure would build on the Fed for a faster tapering.”

Fed Chair Powell signalled last week that the meeting would include a discussion about a faster tapering of bond-buying.

“It would reaffirm in many people’s minds that the Fed is behind the curve,” said Quinlan.

If the inflation number implies a need to hike rates faster, this “would put pressure on technology and give a bid to cyclicals” he said.

“You’d want to buy the companies that could pass on these higher costs to consumers. That undermines the growth story. You want to own more cyclicals and value than growth,” said Quinlan.

A Reuters poll of economists predicted the Fed would raise rates by 25 basis points to 0.25-0.50 per cent in the third quarter of next year. However, most saw the risk that a hike comes even sooner.

According to preliminary data, the S&P 500 lost 33.58 points, or 0.71 per cent, to end at 4,667.63 points, while the Nasdaq Composite lost 269.08 points, or 1.70 per cent, to 15,517.90. The Dow Jones Industrial Average rose 6.07 points, or 0.02 per cent, to 35,760.82.

Markets have seesawed since late November when the Omicron variant was discovered. Investors worried it could upend a global recovery at a time of surging inflation with Fed commentary exacerbating volatility.

Wall Street’s main indexes were supported this week by an update showing Pfizer and BioNTech’s vaccine offered some protection against the Omicron variant.

Data showed initial claims for state unemployment benefits tumbled 43,000 last week to 184,000, the lowest level in more than 52 years.

CVS Health Corp rose after the drugstore operator raised its 2021 profit forecast.

GameStop Corp fell after the video game retailer, which has been popular among retail investors, said it was issued a subpoena by the US securities regulator back in August for documents on an investigation into its share trading activity.