The three major US stock indexes ended the session in the red following the US Department of Labor’s April Consumer Price Report, which showed the biggest gain in nearly 12 years.
The Dow Jones Industrial Average fell 681.5 points, or 1.99 percent, to 33,587.66; the S&P 500 lost 89.06 points, or 2.14 percent, to 4,063.04; and the Nasdaq Composite Index fell 357.75 points, or 2.67 percent, to 13,031.68.
Of the top 11 sectors of the S&P 500, 10 closed in negative territory, with the consumer discretionary sector losing the most.
The consumer price report was eagerly awaited by market participants who are increasingly worried about whether the current price jumps will defy Fed assurances by turning into long-term inflation.
But pent-up consumer demand, fueled by stimulus and savings, collides with a supply drought, leading to soaring commodity prices, while a labor shortage is pushing up labor markets. wages.
“The topic that everyone is concerned about is obviously inflation,” said Matthew Keator, managing partner of Keator Group, a wealth management company in Lenox, Massachusetts. “It’s something that [Fed] sought and they finally made their wish come true.
“The question is, how long will its fires heat up before it starts to simmer?” “
This concern is shared by Stuart Cole, chief macroeconomist at Equiti Capital in London.
“Going forward, the big question is how long can the Fed maintain its accommodative stance on the markets – especially if companies start raising wages to encourage the unemployed to re-enter the workforce, deepening in turn a big hole in the Fed’s transitory inflation. argument, ”Cole said.
The Consumer Price Index (CPI), which excludes volatile food and energy products, rose 3% year-on-year, exceeding the central bank’s average annual inflation growth target of 2%.
Energy was the lone winner, advancing 0.1%, driven by higher crude prices.
Leading mega-caps including Amazon.com Inc, Apple Inc, Alphabet Inc, Microsoft Corp and Tesla Inc fell 2% to 3% as investors avoided what many see as stretched valuations.
“The higher than expected CPI count has led to further weakness in tech stocks,” said Michael James, managing director of equity operations at Wedbush Securities in Los Angeles. “Tech investors are concerned that higher rates could lead to multiple squeeze and less attractive valuations for tech names in a higher rate environment.”
The CBOE volatility index, an indicator of market anxiety, closed at 27.64, its highest level since March 4.
Online dating platform Bumble Inc has gained in after-hours trading after releasing quarterly results.
The first quarter earnings season is on the wane, with 456 S&P 500 constituents reporting. Of those, 86.8% exceeded consensus estimates, according to Refinitiv IBES data.
Falling issues outnumbered rising issues on the New York Stock Exchange by a ratio of 6.05 to 1; on the Nasdaq, a ratio of 3.84 to 1 favored the declines.
The S&P 500 recorded nine new 52-week highs and no new lows, and the Nasdaq Composite Index recorded 34 new highs and 118 new lows.
Volume on the US stock exchanges was 11.82 billion shares, compared to an average of 10.44 billion over the last 20 trading days.