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Wednesday, May 12, 2021

Dow Tumbles Nearly 700 Points as Inflation Runs Hot


Stocks tumble on Wednesday after consumer prices in the U.S. jumped in April by the most since 2009.

BY JOSEPH WOELFEL , MAY 12, 2021 4:19 PM EDT



Stocks ended lower Wednesday for a third session after consumer prices in the U.S. jumped in April by the most since 2009 and added to concerns that the Federal Reserve could lift interest rates sooner than it has signaled.

The Dow Jones Industrial Average tumbled 681 points, or 1.99%, to close at 33,587, the S&P 500 dropped 2.14% and the Nasdaq slumped 2.67%.

Apple (AAPL) - Get Report fell 2.5% and Microsoft (MSFT) - Get Report declined 2.9%.

The consumer price index rose 0.8% in April from March. The core CPI, which strips out food and energy costs, rose 0.9% in April from March. It was the largest increase in the core measure since 1982.

On an annual basis, the CPI surged 4.2%, though comparisons are skewed by the pandemic in 2020. Economists had forecast consumer inflation to rise 3.6%.

Inflation concerns have gripped markets for much of the past few weeks, sending stocks into their longest losing streak in two months and on Tuesday pulling the Dow to its biggest single-day decline since late February.

"The markets have been hovering around all-time highs with a lot of the reopening trade already priced in. So it’s not out of the question that the outsized inflation read could bring us back down to Earth a bit," said Mike Loewengart, managing director of investment strategy at E-Trade.

"Keep in mind the Fed has made it clear that it won’t let inflation increases necessarily sway it from its easy money policies and further any jumps like this could be transitory. So is this a trend? That remains to be seen," he added.

The Federal Reserve has tried to assure Wall Street that any bump higher in inflation would be transitory even as it allows the economy to run hot as it recovers.

The fear among investors, however, is that price pressures will force the central bank to raise interest rates and taper its monthly asset purchases sooner than it has signaled.

Fed Vice Chairman Richard Clarida said Wednesday the central bank "would not hesitate to act” if necessary to bring inflation down to its target range of around 2%.

Treasury yields rose after the release of the consumer price index. The yield on the benchmark 10-year Treasury increased to 1.686%.

Is Recent Rotational Action Ready to Reverse?

Oil prices rose Wednesday to above $66 a barrel as the biggest U.S. pipeline remained closed following a cyberattack at the end of last week.

Colonial Pipeline, which delivers around 45% of all refined fuels along the eastern U.S. coast between Texas and New York, told federal officials it would know late Wednesday whether it was safe to restore its network to full capacity.

Filling stations across the East Coast have begun reporting gas shortages since Colonial Pipeline was hacked on Friday.



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