Stocks Sink .again
Damian J. Troise and Alex Veiga
Aggrandizement worries rattled Wall Street Wednesday, pulling the Dow Jones Industrial Average more than 680 points lower and placing the major stock indexes on track for their worst calendar week in more vi months.
The selling came as investors reacted to a surprisingly large spring in inflation last calendar month that stoked concerns that the economic system may bounce dorsum too fast from its pandemic-induced doldrums.
Tech giants, which had soared during the by year of lockdowns, took some of the biggest losses. Only energy stocks eked out a small proceeds.
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Bond yields snapped higher after the government reported that consumer prices rose 0.eight% in Apr, more than than expected, and prices rose yr-over-year at the fastest rate since 2008.
The yield on the 10-twelvemonth Treasury note rose to ane.69% from 1.62% a day before, a large move. Bond yields rise when investors fear that an increase in inflation will erode the hereafter value of the income that bonds pay.
"Inflation and interest rate jitters are hitting the market today, but for now the sell-off has been orderly," said Cliff Hodge, chief investment officeholder for Cornerstone Wealth. "Letting some air out of these sky-high valuations is a positive going frontwards."
The South&P 500 lost 89.06 points, or two.1%, to 4,063.04, its biggest one-day drop since late February.
The Dow fell 681.50 points, or ii%, to 33,587.66, the worst turn down for the blue chip index since late January. The Nasdaq gave up 357.75 points, or 2.seven%, to xiii,031.68. It was the tech-heavy index's largest pullback since mid-March.
Small company stocks as well gave up the most ground. The Russell 2000 index fell 71.85 points, or 3.3%, to 2,135.xiv.
Inflation concerns accept been hitting the stock market hard this week. The S&P 500, Nasdaq and Dow are on track for their biggest weekly loss since October. xxx. The Dow and S&P 500 had set all-time highs just last Friday.
Investors have been worrying that inflation could render after being absent-minded for many years as the economy revs out of the recession brought on by the pandemic. Federal Reserve officials and other economists have said moderate aggrandizement may actually be a practiced matter in a recovery.
While the latest reading on inflation was hotter than expected, the market shouldn't be also surprised about aggrandizement rising, said Jeff Buchbinder, equity strategist at LPL Fiscal. The prevailing sentiment is that rising inflation will exist temporary, though "it's too early on to say whether these higher levels are going to be sustained," he said.
The surge inflation is a reflection of the pent-up need in the economy, said Terry DuFrene, global investment specialist at J.P. Morgan Private Bank.
"This is not a repeat of the 1980s, when nosotros had hyperinflation," he said. "This is not something that's going to be permanent."
Concerns virtually rising inflation too raise the question of whether the Federal Reserve will change its posture on maintaining low involvement rates as the economic system recovers. Buchbinder said investors shouldn't expect that to happen whatever time soon, however, given that the economy, and especially the job market place, are still a long way from being fully recovered.
"Really the Fed has one mandate right at present, which is to regain full employment, and information technology'southward going to take some time," Buchbinder said.
Analysts expect consumer prices to rise as the economy recovers, but higher prices could run the risk of curtailing some spending, which the economic system needs to sustain its recovery. The cost of new cars rose 0.five% in April, the largest increase since final July, because of heavy need and a computer chip shortage that has slowed production and reduced dealer supplies.
Rising inflation makes stocks seem more expensive, particularly loftier-value tech stocks that trade on the potential for their future profits in coming years. Apple, Microsoft and Amazon all fell more than ii%.
Tesla fell iv.4%, bringing its pullback then far this calendar month to nearly 17%. That has the electric car maker's stock on step for its worst month since the pandemic plunge of March 2020, when it lost 21.vi%.
Energy prices continued to climb following the shutdown of a major gas pipeline on the Eastward Declension earlier in the week, and there are now reports of gasoline hoarding happening in places like Northward Carolina.
Source: https://www.usatoday.com/story/money/markets/2021/05/12/stocks-lower-bond-yields-rise-after-inflation-report/5056440001/
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