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S&P 500 Falls as Bears Strengthen Grip on Tech After April Inflation Soars

Stock MarketsMay 12, 2021 03:21PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 fell Wednesday as the wreck in tech intensified on concerns red-hot inflation is here to stay after jumping by the most since 2008, driven by rising auto prices and airfare.

The Dow Jones Industrial Average fell 1.65%, or 567 points, the S&P 500 slipped 1.92%, and Nasdaq Composite slumped 2.5% 

The Labor Department said Wednesday its consumer price index rose 0.8% in April, and 4.2% year-on-year, the fastest pace since 2008. Excluding food and energy, core CPI increased 0.9% in April.

"Nearly half of that jump [in the core] was due to sharp increases in used car prices and airfare (both +10% mom), as demand for domestic travel rebounded with further easing in restrictions," RBC said in a note.

The latest update on inflation expectations suggest this is unlikely to be a one and done story.

The 10-year inflation "breakevens” -- a key measure of inflation expectations over the next decade – jumped 2.57%, the highest level since September 2012.

The Federal Reserve has previously reiterated that the factors boosting inflation will eventually run out of steam.

"While this was a massive surprise, the Fed will likely continue to make the case that a lot of these pressures are transitory and will fade later this year as consumer demand for goods subsides and the supply side catches up," Jefferies (NYSE:JEF) said.

Investors continued to shun growth stocks like technology, which have higher valuations that are less attractive in an inflationary environment, where money today is worth more than money in the future.

Google-parent Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) fell more than 2%. While Facebook (NASDAQ:FB) was down 1%. 

Energy sidestepped the market selloff thanks to rising oil prices as bullish sentiment on the recovery in crude demand ahead of the summer driving season offset data showing a weekly build in U.S. crude supplies.

Crude oil supplies fell 427,000 barrels last week, compared with analysts' expectations for a draw of 2.817 million barrels.

Looking ahead, some on Wall Street are anticipating further downside in the S&P 500 if selling sparks a meaningful break below 4,100 in the S&P 500.  

"Our short-term call for elevated volatility in Q2/Q3 has materialized, and we are still looking at the potential of a correction in the magnitude of -10-15% for the S&P. If 4100 fails to hold on a closing basis in sessions ahead, we are looking at next levels toward the 3800-4000 zone," Janney Montgomery Scott said.

S&P 500 Falls as Bears Strengthen Grip on Tech After April Inflation Soars
 

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Comments (16)
Sharon Carms
Sharon Carms May 12, 2021 4:17PM ET
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OMG the stock market saw a red day! Better print another trillion dollars! And do not stop printing until the middle class is eliminated and people are forced to work in gulags!
Jake Might
Jake Might May 12, 2021 4:11PM ET
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just how many times has market dumped due to inflation.
Sean Livingstone
Sean Livingstone May 12, 2021 4:11PM ET
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Tomorrow, they will tell you that the inflation is caused by rising gas prices, and it has been rising since last bottom. Then they say, oh, it bottomed and gas price is back to reasonable range, then stock market goes back up.
Dave Jones
Dave Jones May 12, 2021 4:01PM ET
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drivel
Gary Smith
Gary Smith May 12, 2021 3:49PM ET
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I'm not bothered. Companies will still operate and grow regardless. No economic earthquakes to make me consider selling.
Pat Mathieu
Pat Mathieu May 12, 2021 3:39PM ET
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Trying to squeeze retaillers out of all the Tech stocks that they missed in the first round.
Bull lane
BigBull161 May 12, 2021 3:39PM ET
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What i thought.
Kelly Mayer
Kelly Mayer May 12, 2021 3:30PM ET
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Colossal selloff. Market correcting itself over and over. Continuous rise from here on out. Inflation priced in now.
James Dorward
James Dorward May 12, 2021 3:05PM ET
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Houses, lumber, gas, vehicles, taxes, anything under the sun in rising EXCEPT the stock market. only thing going down.
alex gallegos
alex gallegos May 12, 2021 3:05PM ET
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We're talking just one day.
Pat Mathieu
Pat Mathieu May 12, 2021 3:05PM ET
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It wouldn't make sense but as Alex says it might just be a short correction.
Jacob Steinschlag
Jacob Steinschlag May 12, 2021 2:38PM ET
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guess this article was written by hedge fund bought journalists. Like yesterday, growth is actually outperforming the market while value is being dumped. get your facts straight.
Kevin Eddlemon
Kevin Eddlemon May 12, 2021 2:30PM ET
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Here comes the Biden Recession. The communist media will call it the Trump recession of course.
Wrinkled Asian
Wrinkled Asian May 12, 2021 2:30PM ET
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Let's make everything about which team you're cheering for. Learn a new song already.
James Long
James Long May 12, 2021 2:30PM ET
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Actually, if you study economic history, you'll see that the last several recessions happened under the stewardship of Republican Presidents. 2008/2009 was after GW squandered the surplus Clinton engineered and ****near pushed us over the cliff !. Like it or not, Obama saved us with Zero help from Republicans. I'm an independent but I give credit where credit is due.
Steffen vdm
Steffen vdm May 12, 2021 2:28PM ET
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Let me guess what happens tomorrow: PPI-numbers and jobless claims will be better than expected, stock markets will go up +2% and everything that happened the last couple if days will be forgotten
Mox Mox
Mox Mox May 12, 2021 2:28PM ET
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could be but one day it will not be. I will short all the rallies and when the "good" one comes I'll make a load o' 💸
Ledion Proto
Ledion Proto May 12, 2021 2:28PM ET
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Mox Mox ok buddy. Your 1500 robinhood account will do a lot of damage shorting....
Matt Novakovich
Matt Novakovich May 12, 2021 2:28PM ET
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I'm with Mox
Mark Jannetty
Mark Jannetty May 12, 2021 2:11PM ET
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everyone has been expecting this.
Steffen vdm
Steffen vdm May 12, 2021 2:11PM ET
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What? :-)
Hong Ee Leow
Hong Ee Leow May 12, 2021 2:10PM ET
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If the Fed doesn't do anything to taper the rise in inflation, we'll see something similar to a hyperinflation soon, mark my words
Hong Ee Leow
Hong Ee Leow May 12, 2021 2:09PM ET
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As predicted, energy and financials continue to triumph while tech continues falling
Jacob Steinschlag
Jacob Steinschlag May 12, 2021 2:09PM ET
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the opposite is the case. energy and financials are being dumped while growth and tech is getting dip-bought.
What Name
What Name May 12, 2021 2:06PM ET
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"massive surprise"  What rock is Jefferies living under?
William Bailey
William Bailey May 12, 2021 2:02PM ET
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