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Inflation woes push U.S. stocks to 1-month low, USD struggle

EconomyMay 11, 2021 04:51PM ET
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2/2 © Reuters. FILE PHOTO: A man wearing a facial mask, following the coronavirus disease (COVID-19) outbreak, stands in front of an electric board showing Nikkei (top in C) and other countries stock index outside a brokerage at a business district in Tokyo, Japan, Janu 2/2

By Koh Gui Qing

NEW YORK (Reuters) - U.S. stocks hit a one-month low on Tuesday as speculation that rising inflation pressure could prompt interest rate hikes sooner rather than later dragged on shares and hobbled the dollar, which hovered near a 2-1/2-month low.

Technology stocks were among the biggest losers, mirroring a sell-off in China, where talk of tighter regulation sent technology shares skidding.

But U.S. shares clawed back some of their losses over the course of the day, with the tech-focused Nasdaq Composite reversing the bulk of its early 2% decline.

Investors said the snap back in shares suggested that inflation concerns were not quite so entrenched yet, despite rising commodity prices and labor shortages in the United States. They said the sheer volume of money sloshing around in financial markets also meant some individuals are always looking to invest their cash on pull-backs.

"Welcome to a lot of money," said Paul Nolte, a portfolio manager at Kingsview Investment Management, which oversees $2 billion. "The worry is maybe inflation is something more than transitory, but it looks like this is a mood swing for now rather than a longer-term concern."

The Nasdaq Composite ended little changed, while the Dow Jones Industrial Average dropped 1.4%. The S&P 500 fell 0.9%, off a one-month low struck earlier Tuesday.

Bets that inflation could accelerate in the coming months burst to the fore on Monday when the breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) - a measure of inflation expectations - jumped to a decade-high 2.717%. It traded at 2.695% by late Tuesday.

The 10-year TIPS breakeven rate stood at 2.539%, indicating that the market sees inflation averaging 2.5% a year for the next decade.

All eyes are now on the U.S. consumer price index report to be released by the U.S. Labor Department on Wednesday. Until then, some investors appeared to be buying on dips.

The dollar, which slipped to a 10-week low on Tuesday on concerns that mounting price pressures could erode its value, also narrowed some of its earlier losses.

The dollar index, which measures the greenback against six major currencies, was little changed at 90.188, after touching a low of 89.979. [USD/]

The currencies of major natural resource suppliers such as Canada held ground amid rising commodity prices. The loonie was little changed at C$1.2097 after hitting a 3-1/2-year high of C$1.2078.

The Australian dollar, another proxy for commodity prices, was steady at $0.7839, but off a 10-week high of $0.7891 struck on Monday.

Gold also recouped early declines, as a softer dollar offset losses generated by rising U.S. Treasury yields. Spot gold edged up 0.11% to $1,837.39 per ounce, after dropping as much as 1% earlier.

In keeping with market worries about a pick-up in inflation, the yield on benchmark 10-year Treasuries edged up to 1.6235%, though off a high of 1.6310%. [US/]

The spread between benchmark two- and 10-year Treasuries also widened slightly to 146 basis points, up more than 1 basis point from the previous day.

Oil prices were not spared of the day's volatility, and had reversed all early losses by the end of Tuesday's session, lifted by fears of a gasoline shortage after a cyber attack caused an outage at the largest U.S. fuel pipeline system.

U.S. crude gained 0.8% to $65.44 a barrel. Brent crude added 0.5% to $68.69 per barrel. [O/R]

In cryptocurrencies, ether dipped from record levels hit on Monday, but was nevertheless up 3.7% at $4,101.15. The value of the second-biggest digital token has surged over 5.5 times so far this year.

Graphic: China's BAT (LON:BATS) tech stocks hit by anti-monopoly drive, https://fingfx.thomsonreuters.com/gfx/mkt/nmovaglrova/Pasted%20image%201620729305614.png

Inflation woes push U.S. stocks to 1-month low, USD struggle
 

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Comments (15)
Angry Potato
Angry Potato May 12, 2021 3:11AM ET
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If inflation means that money lose buy power, then shouldn't the stocks go higher? :)
Anthony Anthony
Anthony Anthony May 11, 2021 3:42PM ET
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When you keep feeding jobless incompetents with free money, inflation is expected to happen.
Simon Meszaros
Simon Meszaros May 11, 2021 1:39PM ET
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inflation would have had opposite effect. yes it may be in price already. anyway. its reshuffle, you got data now what market does so big players can now reshuffle positions. these news are very valuable endeed,, has tonread inbetween lines, then its valuable imho
Investing Man
Investing Man May 11, 2021 1:02PM ET
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You cant take all the profit without covering it up first.
Who Cares
Who Cares May 11, 2021 8:38AM ET
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There's always Bitcoin, Dogecoin, land, gold or cash, the last one was a joke
Investing Man
Investing Man May 11, 2021 8:38AM ET
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Cant get btc, doge, land, or gold without the last one lol
Who Cares
Who Cares May 11, 2021 8:36AM ET
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There's always Bitcoin or Dogecoin, or a block of land or gold or cash the last one was a joke
Gershom Zvi
Gershom Zvi May 11, 2021 7:27AM ET
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Welcome to Buden’s stockmarket snd economy ! Tou got it what you voted for
Andrew Shurney
Andrew Shurney May 11, 2021 7:27AM ET
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exactly. The biggest gain in history by any US President to date since he won in Nov.
Stephen Fa
Stephen Fa May 11, 2021 7:27AM ET
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Riding a strong economy from Trump out of worst pandemic since 1918.
Who Cares
Who Cares May 11, 2021 7:27AM ET
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Andrew Shurney  Amazing how you lefties can take credit for things you say you hate, i.e. the 1% getting wealthier. Biden says "I'm not governing for Wall Street", I suppose if you only ever do things by good fortune you spin anything as a victory you intended so Biden while wanting to make the wealthy pay more is actually rooting for them to become even more wealthy than everyone else, what now?
Who Cares
Who Cares May 11, 2021 7:27AM ET
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Andrew Shurney  Amazing how the left can take credit for something they say they hate and don't want - the 1% getting wealthier. Biden's rhetoric should mean his goals of making the wealthy pay have been a huge failure by your logic.
Kareem Sultan
Kareem Sultan May 11, 2021 6:29AM ET
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These reasons do not explain well the way of this sell seems every 2 or 3 days they look fir reason to sell and make traders loose money
Ursa Minor
Ursa Minor May 11, 2021 3:45AM ET
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what's even worst is usd goes down markets go down..?!
woomwoom woomwoom
woomwoom woomwoom May 11, 2021 1:53AM ET
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i can't understand deflation bad, inflation bad as well. what is then good? should be like more inflation more profit if you provide services...
Rodolfo Barraco
Rodolfo Barraco May 11, 2021 1:53AM ET
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Good is growth with no inflation (real growth not feds money printing fake growth
Islam Rashad
Islam Rashad May 11, 2021 1:53AM ET
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Over too much inflation is whats scaring the markets
Ovidiu Farauanu
Ovidiu Farauanu May 11, 2021 1:53AM ET
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You are right. Money are flowing into the stock market because of the fear of inflation in the first place. But inflation is not increasing the profit as percent because costs is also inflated. But nowadays stock market is based on investors liquidity more than on profits. Right?
Kaveh Sun
Kaveh Sun May 11, 2021 1:33AM ET
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Biden (n his transport chait Pete) spoke today is the reason
David David
David9 May 11, 2021 1:20AM ET
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Just sell everything... stay home and collect unemployment check, no need to care about eviction and pay for rent, free food at food bank, everything is taken care now...
Roger Pruzansky
Roger Pruzansky May 11, 2021 1:20AM ET
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slave society
Investing Man
Investing Man May 11, 2021 1:20AM ET
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Have too much nector tonight mr. wong?
john dislias
john dislias May 11, 2021 1:12AM ET
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Sick market , decline without reason
Jouni Matero
Jouni May 11, 2021 1:12AM ET
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Sick market indeed, increase dozens of times without reason
Kaveh Sun
Kaveh Sun May 11, 2021 1:12AM ET
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Jouni Matero Biden spoke, spook the market w his plans
Joel Schwartz
Joel Schwartz May 11, 2021 1:12AM ET
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Kaveh Sun FED moved the M2Money Supply parabolic before Powell was in office. This was going to unfold no matter who was in office. Let’s get it over with quickly and move on.
Jouni Matero
Jouni May 11, 2021 1:12AM ET
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weeks before this whatever he said market only went up, that's what I meant. For last 2 months market only went up no matter what, bad news were twisted to good news after all. Just look at last week payroll numbers, they were supposed to be good and market prereacted to that and once they were a total disaster, market makes twisted the news so that they were actually good news and market went even more up. Crazy manipulated circus and about time it makes big correction to this reality.
Expressions Productions
Expressions Productions May 11, 2021 12:43AM ET
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Hate to admit but Trump was right Biden and DEMS will curtail the growth and crush destroy individuals 401K and investment portfolios.
Terry Hester
Terry Hester May 11, 2021 12:43AM ET
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Why do you hate to admit it? Everything he said during his reelection campaign is quickly coming to fruition.
Mike Chen
Mike Chen May 10, 2021 11:15PM ET
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Fed are blind. Buy every dip
Show previous replies (6)
Expressions Productions
Expressions Productions May 10, 2021 11:15PM ET
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Moving assets into Crypto.
Greg Nathan
Greg Nathan May 10, 2021 11:15PM ET
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Expressions Productions  Take the risk with crypto if you want to, but gold is probably a better idea.  I'd have gold first if I were you - or for anybody for that matter.
Aw wright
AndrewJW May 10, 2021 11:15PM ET
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Expressions Productions  there are 2 main types of Bullion Investments; Physical and SKR. Physical is as it suggests, SKR is Safe Keep Receipt; buying the paper rights of ownership without physically moving the Bullion. Crypto is declared the new Gold and Currency, it is neither, it's virtual and holds no intrinsic other than the person ahead believing it's worth more. You're a very brave man investing in the 'new' method of Investing in where they've tried to re-create the wheel and created nothing other than noise.. Good luck
Jacob Steinschlag
Jacob Steinschlag May 10, 2021 11:15PM ET
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Expressions Productions  Yu can move money into crypto when it has crashed again - which it should around September. IF there's hyperinflation till then it won't crash. Anyways, I have to agree that gold and silver are the best inflation hedges right now as they're ridiculously cheap.
Stephen Fa
Stephen Fa May 10, 2021 11:15PM ET
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The intrinsic value of gold is a small fraction of the market value.
 
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