Wall Street closed lower on Wednesday, with S&P’s biggest one-day decline since February, as inflation-related data raises concerns about whether the US Federal Reserve’s interest rate hike could happen sooner than expected.
Three major U.S. stock indices ended the red session after the U.S. Department of Labor’s April consumer price report, showing the biggest increase in nearly 12 years.
The Dow Jones Industrial Average fell 681.5 points, or 1.99 percent, to 33,587.66; The S&P 500 fell 89.06 points, or 2.14 percent, to 4,063.04; The Nasdaq Composite Index fell 357.75 points, or 2.67 percent, to 13,031.68.
Of the 11 major sectors of the S&P 500, 10 have closed in negative territory, leaving the consumer discretionary sector at the bottom.
Consumer price reports were hotly anticipated by market participants who have been increasingly concerned about whether they will deny the Fed’s assurances by turning to long-term inflation.
But with intense concern and stimulus from consumers, intense demand is clashing with supply droughts, pushing up commodity prices, and labor shortages keeping wages high.
“Inflation is obviously on everyone’s mind,” said Matthew Mather, managing partner at Keater Group, a Massachusetts-based Linux asset management company. [Fed] They are looking for and in the end they are getting what they want. “
“The question is how long will the fire stay hot before it starts to burn?”
Stuart Cole, chief macroeconomist at Equity Capital in London, shares this concern.
“Going forward, the big question is exactly how long the Fed can hold on to its vicious position in the face of market opposition – especially if companies start raising wages to bring unemployed workers back into the workforce, arguing that the Fed is driving a big hole in transit inflation,” Cole said.
Excluding temporary food and fuel items, the Consumer Price Index (CPI) rose three per cent year-on-year, exceeding the central bank’s average annual inflation target of 2 per cent.
Fuel was the only earner, driven by increased crude prices, up 0.1 percent.
Market-top mega-caps, including Amazon.com Inc., Apple Inc., Alphabet Inc., Microsoft Corp. and Tesla Inc., fell between 2 percent and 3 percent as investors moved away from price increases.
“Tech stocks have suffered further weakness as CPI numbers have been stronger than expected,” said Michael James, managing director of equity trading at Wadebush Securities in Los Angeles. “Tech investors are concerned that higher rates lead to multiple abbreviations and less attractive values for tech names in a high-rate environment.”
The CBOE Volatility Index, a measure of market concern, closed at 2.6..64, the highest level since March 4.
Online dating platform Bumble Inc. gained business hours after posting quarterly results.
The first-quarter earnings season is declining, 456 reporters of the S&P 500 reported. Of these, .86.86 percent beat the decline estimate, according to data from Refinitive IBES.
Denial of number progress issues compared to the .0.05-to-1 ratio on the New York Stock Exchange; At Nasdaq, a 3.84-to-1 ratio is preferred by Decliner.
The S&P 500 posted nine 52-week highs and no new ones, and the Nasdaq composite index recorded 34 new highs and 118 new lows.
The volume on U.S. exchanges was 11.82 billion shares, averaging 10.44 billion over the past 20 trading days.