Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Wall Street skids on inflation fears; USD, bond yields jump

Stock MarketsMay 12, 2021 05:35PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: TV camera men wait for the opening of market in front of a large screen showing stock prices at the Tokyo Stock Exchange in Tokyo, Japan October 2, 2020. REUTERS/Kim Kyung-Hoon 2/2

By Koh Gui Qing

NEW YORK (Reuters) -U.S. stocks suffered the biggest slump in at least 11 weeks on Wednesday and benchmark Treasury yields jumped after data showed consumer prices in April unexpectedly rose by the highest level in nearly 12 years, prompting bets on earlier interest rate hikes.

A 0.8% jump in the U.S. consumer price index - outpacing a 0.2% forecast - boosted the U.S. dollar as expectations of rising real interest rates burnished the currency's appeal.

The gyrations in financial markets underscored concerns among some investors that the Federal Reserve could be wrong in its prediction that inflation pressures in the United States are temporary, and that the central bank may have to raise rates sooner than it expects.

The prospect of tighter monetary policy knocked shares lower and the stock market steadily extended losses through the day. The Dow Jones Industrial Average shed 2%, the S&P 500 dropped 2.1%, and the Nasdaq Composite lost 2.7%. (N)

For the S&P 500 and the Nasdaq Composite Index, Wednesday's tumble was the biggest fall in a single day since Feb. 25, while the Dow's decline was the sharpest in a day since Jan 29.

Richard Clarida, vice chair of the Federal Reserve, acknowledged on Wednesday that the latest inflation report was the second piece of data in a week to catch the central bank off-guard, describing it as the "biggest miss in history."

Yet Clarida maintained the Federal Reserve's dovish note, saying it will be "some time" before the U.S. economy is sufficiently healed for the central bank to consider pulling back its crisis-level of support.

Some investors continued to challenge the Federal Reserve's assessment, however.

"We’ve been warning about the prospect of higher for longer inflation in the United States for many months, but even we hadn’t predicted this," said James Knightley, chief international economist at ING Group (NYSE:ING).

"We increasingly doubt the Fed’s position that this is transitory and think they will end up hiking rates far sooner than 2024."

Some money market investors seemed to agree. Eurodollar futures contracts expiring in December on Wednesday priced in a 25-basis-point rate hike by the end of next year, compared with 22 basis points before the inflation report.

DOLLAR GAINS

Weakness on Wall Street mirrored stock market losses in Asia, as surging commodity prices stoked inflation concerns. MSCI's broadest index of Asia-Pacific shares outside Japan had slumped 0.95% overnight, after hitting its lowest level since March 26.

European shares fared better. London's blue-chip FTSE 100 rebounded 0.8% as buoyant corporate earnings and a better-than-expected economic growth report bolstered hopes about a sharp recovery from the pandemic-driven recession.

In the United States, the surprisingly strong inflation data lifted Treasury yields. The benchmark 10-year Treasury yield jumped to 1.6952%, its biggest rise in a day since March 18, and the two-year Treasury yield also rose to stand at 0.1668%. [US/]

In keeping with expectations of rising price pressures as the U.S. economy recovers from the COVID-19 pandemic, the yield curve steepened, and the spread between two- and 10-year Treasury yields widened to 152.8 basis points.

The dollar, which could benefit from rising real interest rates, gained after wobbling briefly earlier in the day.

The dollar index, which measures the greenback against six major currencies, rose 0.65% to 90.795.

A stronger dollar dented the euro, which slid 0.6% to $1.2070.

Higher Treasury yields and the stronger dollar dragged on non-yielding bullion. Spot gold slid 1.3% to $1,813.41 an ounce. [GOL/]

Hopes of rising demand on the back of an economic recovery pushed oil prices to eight-week highs.

U.S. crude jumped 1.2% to $66.08 a barrel, the highest close since March 11. Brent crude added 1.1% to $69.32 per barrel, a close last seen on March 5. [O/R]

In cryptocurrencies, ether fell after scaling a new record high overnight, dropping 2% to $4,096.01. The value of the second-biggest digital token has surged over 5.5 times so far this year.

Wall Street skids on inflation fears; USD, bond yields jump
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (13)
Bipin Kochar
Bipin Kochar May 12, 2021 7:30PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The rising commodity prices is largely to a huge surge in demand as the world comes out from the Covid lockdowns and restrictions - and hence will stabilize by mid June. To tame these, Governments should permit rapid reopening of plants closed in past 5 years
Darryl Allen
Darryl Allen May 12, 2021 6:26PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Is this "temporary inflation" the new "15 days to slow the spread"?
YouTube Account
YouTube Account May 12, 2021 11:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Go look at the money supply - THAT is the inflation. Price levels always rise in response to inflation. Banksters et al have subverted the definition of inflation to hide their culpability from your typical sleepwalking American. Sadly, it seems to work. Some of us understand the truth, though.
Notvery Goodathis
Peteymcletey May 12, 2021 10:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks Joe
Notvery Goodathis
Peteymcletey May 12, 2021 10:46AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Ether aka Ethereum?
Jack Hoodie
Jack Hoodie May 12, 2021 8:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
there is too much drama about "fear" than inflation itself smh
Gershom Zvi
Gershom Zvi May 12, 2021 8:06AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
“Deeper and deeper sweeter and sweeter” Madonna’s song
Jacob Steinschlag
Jacob Steinschlag May 12, 2021 3:22AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
'buying the dip in banks, energy and insurances'? hahaha these ones are by far the most overstretched stocks right now. The dips were bought primarily in growth stocks, while value got dumped. ARKK, which can be seen as the growth index jumped 2% yesterday after having started down almost 5%. Get your facts straight.
Gershom Zvi
Gershom Zvi May 12, 2021 3:22AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
DDD stock is rallying
woomwoom woomwoom
woomwoom woomwoom May 12, 2021 1:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
fear of inflation should encourage the purchase more of assets and stocks rather than sell it. Foolishness is hold the cash, which depreciates quickly.
Jannis Tsiolis
Jannis Tsiolis May 12, 2021 1:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yep but a 100 million revenue with 5% inflation is not the same as with 0% inflation ... everythin seems to be overvalued
Bill Pulak
Bill Pulak May 12, 2021 1:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hahaha yea invest in equities? When powell and team need to raise rates to slow inflation..which will be the pin that pops this balloon i will happy to gave cash when the market dumps 40% in tne following year! The market is by all accounts 38% overvalued from historical metrics and always overshoots on tbe downside so 40% is conservative.
YouTube Account
YouTube Account May 12, 2021 1:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
even if we assume your faulty definition of "inflation" (rising prices) how can you not see that the high stock prices also represent "inflation" (i.e. artificially high prices). Currency is too confusing for some people, let alone money.
Mark Stallone
Mark Stallone May 12, 2021 12:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hey Joey.. The 70's called. They want their Economy, Foreign Policy, and overall general Misery back.
king michael
king michael May 11, 2021 11:56PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Short the market all way to near zero. With less than $22 trillion GDP but an national debt over $27 trillion which is also growing at least $4 trillion a year, an immediate 1929 recession is on the way and an national bankruptcy is within a few years. As the government keep restricting US tech companies from selling product to more and more countries, most of the high tech companies especially the semiconductor sector is losing over half of their market which will push them to bankruptcy as EU, Japan, Korea, Taiwan are taking over and dominating in the sectors.
Vv Pp
Vv Pp May 11, 2021 11:56PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Trumpjoker's heritage
yan yan
yan yan May 11, 2021 10:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
chinese indexes are very green ********this guy talking about
Adam Paine
Adam Paine May 11, 2021 10:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
green is down in China correct?
Aniebiet Akang
Aniebiet Akang May 11, 2021 9:18PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
US Inflation Data? It's going to likely be a huge flop again and probably send Gold further North
Adam Paine
Adam Paine May 11, 2021 9:18PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
why is gold not moving with this volatility?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email