Stock Indexes Open Lower, Extending Decline
By Joe Wallace
The Dow Jones Industrial Average extended a recent decline a day
after its biggest drop since February, following fresh data that
showed the spurt in consumer prices picked up speed in April.
The Dow opened 0.4% lower, while the S&P 500 slid 0.7% after
posting its biggest two-decline since early March. The
technology-heavy Nasdaq Composite Index skidded 1.3%.
The consumer-price index jumped 4.2% in April from a year
before, the Labor Department said. Economists surveyed by The Wall
Street Journal had expected a smaller rise of 3.6%. The index
measures what consumers pay for goods and services such as clothes
and vehicles. So-called core prices, excluding the volatile
categories of food and energy, rose 3%.
Concerns that a burst of inflation may prove more intense and
longer-lasting than investors had expected had sharpened focus on
the data. Signs of mounting inflation have weighed on stocks this
week. Rising commodity markets, supply-chain blockages and hiring
difficulties have prompted some investors to expect a prolonged
upswing in consumer prices.
That could lead the Federal Reserve to raise its target for
short-term interest rates sooner than it has signaled, potentially
weighing on stocks and other assets that have benefited from over a
year of near-zero borrowing costs. For their part, several Fed
officials have said the economy still needs support from low
Bond yields rose in response to the inflation data. The yield on
10-year U.S. Treasury notes ticked up n to 1.671%, from 1.623%
Tuesday. Yields, which fall when bond prices rise, had climbed for
three consecutive trading sessions but remain below their March
high of 1.749%.
"Markets are highly sensitive to headline and core levels of
inflation at this moment in time," Edward Park, chief investment
officer at U.K. investment firm Brooks Macdonald, said before the
inflation data was made public. "There is the concern that the
Federal Reserve will lose control if there are signs that the
inflation backdrop does become more prolonged."
Many bond and stock investors think the Fed will maintain its
loose monetary policy, "but at the same time, that conviction gets
tested by things like [last week's] jobs report," Mr. Park added.
"Markets feel confused and conflicted."
Other factors have also knocked down stocks in recent days,
including signs that the U.S. economy -- while still expanding at a
fast clip -- has passed its peak rate of growth, said Anna
Stupnytska, global economist at Fidelity International. The market
was also vulnerable after a steep run-up in prices at the start of
"The main worry is that...because of inflation moving higher,
central banks will start tightening," Ms. Stupnytska said. She
thinks U.S. inflation will subside next year and that the Fed won't
hike rates until well into 2023. Still, multiasset funds at
Fidelity International have bought Treasury inflation-protected
securities, gold and industrial metals as a hedge against
In commodity markets, Brent-crude futures, the benchmark in
energy markets, rose 1.1% to $69.34 a barrel. The glut of crude and
oil products that built up near the start of the pandemic has
mostly cleared in members of the Organization for Economic
Cooperation and Development, the International Energy Agency said
in a monthly report.
Iron-ore futures hit fresh highs in New York, jumping 5% to
$226.01 a metric ton. Prices for the steel ingredient have shot up
due to strong demand from China.
Overseas markets were mixed. Gains for telecom stocks helped to
push the Stoxx Europe 600 up 0.2% after the index on Tuesday posted
its biggest fall since December.
Shares of Commerzbank jumped over 7% after the German lender
boosted its revenue outlook for the year and reported an unexpected
profit for the first quarter. ABN Amro Bank dropped more than 8%
after the Dutch bank posted a loss for the first quarter, in part
due to a settlement with prosecutors over a probe into
In Asian markets, Taiwan's Taiex tumbled 4.1% after the
government tightened coronavirus restrictions. Japan's Nikkei 225
fell 1.6% by the close and China's Shanghai Composite rose
Write to Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
May 12, 2021 09:46 ET (13:46 GMT)
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