Stock Pullback From Highs Accelerates; Yields Rise: Markets
New York (May 12) U.S. stocks slumped for a third day and bond yields climbed after a report showed inflation rose more than forecast, adding to concern that price pressures will stifle a recovery in the world’s biggest economy.
The technology sector continues to lead the retreat in equities, with Apple and Microsoft pacing declines in the Nasdaq 100. Cathie Wood’s
ARK Innovation ETF resumed its slide, bringing this year’s loss to about 18%. After closing at a record high on Friday, the benchmark S&P 500 slumped the most since Feb. 25. Energy was the only one of the 11 industry sectors in the green. Treasury yields moved briefly off the highs of the day after a successful 10-year note auction.European stocks closed mostly higher, lifted by optimism about economic re-openings and booming commodities.
“The markets have been hovering around all-time highs with a lot of the reopening trade already priced in,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial. “So it’s not out of the question that the outsized inflation read could bring us back down to earth a bit.”
Heating Up
U.S. core and headline inflation both jumped more than forecast in April
Source: Bureau of Labor Statistics
The consumer price index increased 0.8% from the prior month after a 0.6% gain in March. Excluding the volatile food and energy components, the so-called core CPI rose 0.9% from March.
“The CPI data point feeds into a myopic narrative that the U.S. is overheating and the Fed is one step away from tightening,” said Mike Bailey, director of research at FBB Capital Partners. “Bears will feast on this tightening theme in the short term, but my sense is inflation will prove fleeting and markets will revert back to a more bullish view of moderate growth and lower risk of Fed tightening until we get to a full recovery.”
Elsewhere,
Bitcoin’s reputation as an inflation hedge among advocates of the cryptocurrency appeared to be question after the CPI report. The digital asset slumped as much as 4.4% to around $54,400.
Copper and iron ore were on course for new records amid a broadening
commodities boom. Oil was steady above $65 per barrel. The biggest U.S. pipeline is still closed in the wake of a cyberattack, leading to acute fuel shortages in some parts of the nation.
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