By Yasin Ebrahim

Investing.com – The S&P 500 slumped Tuesday, after Federal Reserve Chairman Jerome Powell signaled a more aggressive approach to scale-back bond purchases at a time when concerns about the new Omicron variant remained front and center.

They fell 1.9%. It fell 1.9% or 652 points. The Nasdaq dropped 1.6%

“The economy is very strong and inflationary pressures are high, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner,”  Powell said in testimony before the Senate Banking Committee.

In a sign that elevated inflation could persistent for longer than expected, Powell conceded that it was “good time to retire that word [transitory].”

Some welcomed however the Fed’s shift in tone about inflation. Others were supportive of an earlier taper after a spike in inflation.  

“I think it’s healthy to see Powell recognize that inflation is real, it’s not just coming and going, but part of the fabric of the global economy right now,” Eric Diton, president & managing director of The Wealth Alliance told Investing.com in an interview.

“The Fed should taper [faster]He said, “I scratched my brain as to how they buy the current amount of bonds each month, when we are seeing inflation, strong earnings, and very high consumer demand.”

Powell’s update rattled risk-sensing sentiment as it came amid uncertainty over the economic impact of Omicron coronavirus.

Moderna (NASDAQ:) chief executive Stéphane Bancel “warned of a material drop,” in vaccine in efficacy against the Omicron variant.

Regeneron (NASDAQ:) also added to fears about the virus impact after saying its Covid-19 antibody drugs could be less effective against the new variant. More than 2% of its shares were lost.

Communications services suffered the most, with Dish, Discovery and Twitter (NYSE) being the worst offenders.

Twitter Inc (NYSE): fell 4.4% due to Wall Street’s negative reaction to Jack Dorsey’s resignation as CEO of social media firm.  

“We believe investors were expecting or hoping for an external candidate to take over … [with] experience that would help it reach its user growth and revenue targets, with a focus on improving ad tech,” Wedbush said in a note as it cut its price target on Twitter to $52 from $69.

As new concerns over the effect of Covid on travel demand are raised, energy prices continued to rise as oil prices rose. This will likely force OPEC to postpone plans to raise production at its meeting on Thursday.  

OPEC+ confirming its plan to increase production is “virtually unimaginable in view of the latest market developments,” Commerzbank said in a note

“In our opinion, any such decision would exert further pressure on oil prices in the current market environment, which is hardly likely to be in the interests of the OPEC+ members.”

The tech sector performed better than other industries, with a decrease of 1%.

In other tech news, Meta Platforms (NASDAQ:) ended flower after the U.K. competition watchdog told the social media giant it must sell GIF-sharing platform Giphy after concluding that the acquisition would reduce competition between social media platforms.

“We were overdue for a correction, but I’m a buyer into it as a pullback might open up opportunities for tax loss harvesting as well as opportunities for better entry points in equities,” Diton added.