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S&P 500 Slumps as Tech Bulls Scatter Amid Inflation Tsunami Worries

Stock Markets May 12, 2021 04:04PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 closed lower Wednesday as the tech selloff continued on concerns red-hot inflation is here to stay after jumping the most since 2008, driven by rising auto prices and airfares.

The Dow Jones Industrial Average fell 1.99%, or 682 points, the S&P 500 slipped 2.1%, and Nasdaq Composite slumped 2.7% 

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) fell 3%, while Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) fell more than 2%. Facebook (NASDAQ:FB) closed down 1.3%. 

Consumer discretionary was also down sharply as Casino stocks and retailers came under pressure with Caesars Entertainment (NASDAQ:CZR) and Gap (NYSE:GPS) leading the decline.

Energy ended flat, outperforming the broader market, with 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 Slumps as Tech Bulls Scatter Amid Inflation Tsunami Worries
 

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Comments (15)
craig Thom
craig Thom May 13, 2021 1:02AM ET
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ups and downs part of the game hopefully you have more ups than downs
Larson Leyson
Larson Leyson May 12, 2021 8:40PM ET
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to finance 4 trillion with interest of 2+% on the future generation's shoulder, what a POTUS !!
Larson Leyson
Larson Leyson May 12, 2021 8:38PM ET
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Yeah let's see if Old Joe will still want to spend trillions amid inflation and stock rout and trash dollar !  USA going down the hill as anticipated !
Mike Chen
Mike Chen May 12, 2021 7:58PM ET
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Fed targets full employment, weak dollar, low interest rate, QE and the end product is High inflation to clear future debts!
Leon Kelly
Leon Kelly May 12, 2021 6:01PM ET
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Rally tomorrow after low weekly job numbers reported. Sentiment will be that the fed's won't change rates , or that will continue its support".
SquadW Name
SquadW May 12, 2021 5:53PM ET
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inflation = value stocks going up, tech going down
William Bailey
William Bailey May 12, 2021 5:49PM ET
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Print free credit for 13 years and top it off with a cherry-9-trillion -bomb and ghats what happens you greedy gannets
Hunter Gassaway
Hunter Gassaway May 12, 2021 5:08PM ET
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T-800 Model 101, here we go!
mehboob qayyum
mehboob qayyum May 12, 2021 5:06PM ET
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god bless you all friends
Mario tragik
Mario tragik May 12, 2021 4:52PM ET
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bla bla tomorrow the fed speaks same bs and we rip wiping off losses rinse n repeat
 
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