By Geoffrey Smith
Investing.com -- U.S. stock markets slumped at the open on Tuesday, as the selling that first hit tech stocks on Monday broadened to take in virtually everything else.
Fears that inflation may force the Federal Reserve to tighten monetary policy earlier than it wants have again exposed the precariousness of valuations for some stocks, especially loss-making startups in the technology space. Those fears have intensified as commodity prices have risen relentlessly over the last few weeks..
By 9:45 AM ET (1345 GMT), the Dow Jones Industrial Average was down 383 points, or 1.1%, at 34,359 points. The S&P 500 was also down 1.1% but the tech-heavy Nasdaq Composite, which lost nearly 2% on Monday, again underperformed with a loss of 1.2%. However, all three indices pared their losses in the minutes after opening to be down around half a percent by 10 AM ET.
The selling comes, paradoxically, at the end of an earning season that has more than matched most expectations, even allowing for the fact that the first quarter of 2020 - when the pandemic first erupted – made for some easy year-earlier comparables. Randy Frederick of Charles Schwab (NYSE:SCHW) noted via Twitter that with 91% of S&P 500 companies having reported, earnings per share were around 47% higher than a year ago, almost double what had been expected two weeks ago.
It also comes against broadening signs of inflationary pressures in the economy, although there is still much disagreement over how serious or sustained such threats could be. Prices for industrial metals and some agricultural commodities continued to gain on Tuesday, soybean futures hitting their highest since 2012. Overnight, China's April producer prices had posted their fastest growth since 2018 at nearly 7%, suggesting that the final price of manufactured goods is likely to rise in due course.
Finally, the U.S. National Federation of Independent Businesses' May survey, released earlier, corroborated what many had suspected after Friday's shock payrolls report: that companies are struggling to find the workers they want, even though 16 million people continue to claim unemployment-related benefits. That suggests that wages may rise further and faster than the Fed has so far assumed. The Labor Department's JOLTS job openings survey for April, also released on Tuesday, showed an all-time high of 8.123 million vacancies, far above the 7.5 million expected.
Among individual stocks, Tesla (NASDAQ:TSLA) stock fell below $600 briefly before bouncing to be down only 2%. The carmaker has reportedly shelved its plans to buy land to expand its Shanghai factory, putting a question mark over its medium-term growth trajectory.
Reports also suggested its sales in China fell 27% in April after a high-profile and – apparently – politically approved wave of bad publicity that suggested Tesla is starting to become something of a political football as relations between China and the U.S. remain in the deep freeze.
Apple (NASDAQ:AAPL) stock also fell 2.3% amid reports that investing guru Cathie Wood had sold Apple stock and other liquid names such as Roche ADRs (OTC:RHHBY) out of her suite of investment portfolios ahead of likely redemptions. Wood's ARK Innovation ETF has been a popular vehicle for those seeking long-duration exposure to technologies that boast a bright future but are still unprofitable today. Poor liquidity in some of ARK's smaller holdings is widely seen as making forced sales deeply unattractive.