By Joe Wallace and Alexander Osipovich 

U.S. stocks fell Monday, dragged down by declines among technology shares, as concerns about inflation continued to unsettle investors.

The Dow Jones Industrial Average fell 138 points, or 0.4%, in afternoon trading. The S&P 500 dropped 0.6%, while the tech-heavy Nasdaq Composite declined 1.1%.

With earnings season drawing to a close, investors remain focused on whether a recent jump in inflation will blow over or become entrenched. A protracted spell of faster growth in consumer prices could prompt the Federal Reserve to tighten monetary policy, potentially hurting stocks and other assets that have benefited from low interest rates.

Those concerns last week led the S&P 500 to post its biggest weekly decline since late February, even after staging a rebound Friday. Highflying tech stocks have been particularly vulnerable to worries about inflation: The Nasdaq has fallen for four straight weeks, its longest losing streak since August 2019.

"We see this as transitory, but you never know: There is stuff in here that could take a bit longer," said Lars Skovgaard Andersen, investment strategist at Danske Bank Wealth Management. "There will be some volatility in markets still."

Quickening inflation has sharpened focus on statements by Fed officials, who have made the case that the pickup will fade, allowing the central bank to keep supporting the economy.

Top Fed officials said Monday that they saw a recent bout of price increases as a transitory blip and reiterated their support for stimulus. Federal Reserve Vice Chairman Richard Clarida, the Fed's second-in-command, said the U.S. economy hadn't yet reached the "substantial further progress" that would be needed before the Fed pared back its bond purchases.

Another member of the Fed's rate-setting committee, Federal Reserve Bank of Atlanta President Raphael Bostic, said he wasn't ready for the central bank to dial back its support for the economy. Speaking on CNBC, Mr. Bostic said it could take months to get a good reading on inflation.

Gold, a traditional hedge against inflation, rose to its highest levels in more than four months. Futures on the precious metal rose 1.7% to $1,869 a troy ounce, on track for their highest settle since early January. Money has started to flow back this month into the SPDR Gold Trust, the biggest gold-backed exchange-traded fund.

Technology and communications stocks were the worst-performing sectors of the S&P 500 on Monday. Apple, Facebook and Microsoft were all down more than 1%.

In corporate news, AT&T shares ticked up 0.3% after the telecom giant agreed with Discovery to combine the two companies' media assets into a new, publicly traded company. AT&T would receive $43 billion under the deal.

Class A shares of Discovery slid 4%, after initially jumping more than 11% in morning trading.

Bitcoin tumbled more than 13% over the weekend to around $42,400 after a tweet by Tesla Chief Executive Elon Musk prompted speculation that the electric-car maker had sold, or would sell, its holdings of the cryptocurrency. Mr. Musk later tweeted that Tesla hadn't sold any bitcoin. Shares of Tesla fell 3.2%.

In the bond market, the yield on 10-year Treasury notes slipped to 1.637%, from 1.639% on Friday. Bond yields fall as prices rise.

Overseas, the Stoxx Europe 600 was roughly flat in recent trading. Chinese stocks rose after data showed the nation's industrial output jumped 9.8% year-over-year in April, beating forecasts, while retail sales rose by a lower-than-expected 17.7%. The Shanghai Composite Index advanced 0.8%.

In Taiwan, the benchmark Taiex fell 3%, building on a pullback of more than 8% last week. Over the weekend, authorities implemented more restrictive measures to combat Covid-19 amid an increase in new local infections, and on Monday Taiwan reported a record of 333 new local cases.

Japan's Nikkei 225 lost 0.9%.

Chong Koh Ping in Singapore contributed to this article.

Write to Joe Wallace at Joe.Wallace@wsj.com and Alexander Osipovich at alexander.osipovich@dowjones.com

 

(END) Dow Jones Newswires

May 17, 2021 13:57 ET (17:57 GMT)

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