NATIONAL NEWS

Stocks Sink Again On Wall Street As Inflation Worries Mount

May 12, 2021, 3:59 PM

FILE (Photo by Spencer Platt/Getty Images)...

FILE (Photo by Spencer Platt/Getty Images)

(Photo by Spencer Platt/Getty Images)

NEW YORK (AP) – Inflation worries rattled Wall Street Wednesday, pulling the Dow Jones Industrial Average more than 680 points lower and placing the major stock indexes on track for their worst week in more than six months.

The selling came as investors reacted to a surprisingly big jump in inflation last month that stoked concerns that the economy may bounce back too fast from its pandemic-induced doldrums.

Tech giants, which had soared during the past year of lockdowns, took some of the biggest losses. Only energy stocks eked out a small gain.

Bond yields snapped higher after the government reported that consumer prices rose 0.8% in April, more than expected, and prices rose year-over-year at the fastest rate since 2008.

The yield on the 10-year Treasury note rose to 1.69% from 1.62% a day earlier, a big move. Bond yields rise when investors fear that an increase in inflation will erode the future value of the income that bonds pay.

“Inflation and interest rate jitters are hitting the market today, but for now the sell-off has been orderly,” said Cliff Hodge, chief investment officer for Cornerstone Wealth. “Letting some air out of these sky-high valuations is a positive going forward.”

The S&P 500 lost 89.06 points, or 2.1%, to 4,063.04, its biggest one-day drop since late February.

The Dow fell 681.50 points, or 2%, to 33,587.66, the worst decline for the blue chip index since late January. The Nasdaq gave up 357.75 points, or 2.7%, to 13,031.68. It was the tech-heavy index’s largest pullback since mid-March.

Small company stocks also gave up the most ground. The Russell 2000 index fell 71.85 points, or 3.3%, to 2,135.14.

Inflation concerns have been hitting the stock market hard this week. The S&P 500, Nasdaq, and Dow are on track for their biggest weekly loss since Oct. 30. The Dow and S&P 500 had set all-time highs just last Friday.

Investors have been worrying that inflation could return after being absent for many years as the economy revs out of the recession brought on by the pandemic. Federal Reserve officials and other economists have said moderate inflation may actually be a good thing in a recovery.

While the latest reading on inflation was hotter than expected, the market shouldn’t be too surprised about inflation rising, said Jeff Buchbinder, equity strategist at LPL Financial. The prevailing sentiment is that rising inflation will be temporary, though “it’s too early to say whether these higher levels are going to be sustained,” he said.

The surge in inflation is a reflection of the pent-up demand in the economy, said Terry DuFrene, global investment specialist at J.P. Morgan Private Bank.

“This is not a repeat of the 1980s, when we had hyperinflation,” he said. “This is not something that’s going to be permanent.”

Concerns about rising inflation also raise the question of whether the Federal Reserve will change its posture on maintaining low interest rates as the economy recovers. Buchbinder said investors shouldn’t expect that to happen any time soon, however, given that the economy, and particularly the job market, are still a long way from being fully recovered.

“Really the Fed has one mandate right now, which is to regain full employment, and it’s going to take some time,” Buchbinder said.

Analysts expect consumer prices to rise as the economy recovers, but higher prices could run the risk of curtailing some spending, which the economy needs to sustain its recovery. The cost of new cars rose 0.5% in April, the largest increase since last July, because of heavy demand and a computer chip shortage that has slowed production and reduced dealer supplies.

Rising inflation makes stocks seem more expensive, particularly high-value tech stocks that trade on the potential for their future profits in coming years. Apple, Microsoft, and Amazon all fell more than 2%.

Tesla fell 4.4%, bringing its pullback so far this month to nearly 17%. That has the electric car maker’s stock on pace for its worst month since the pandemic plunge of March 2020, when it lost 21.6%.

Energy prices continued to climb following the shutdown of a major gas pipeline on the East Coast earlier in the week, and there are now reports of gasoline hoarding happening in places like North Carolina.

KSL 5 TV Live

National News

Post reading "Wall Street"...

Stan Choe, AP Business Writer

Stock market today: Wall Street rises to more records to close out its latest winning month

The stock market has been on a nearly unstoppable run since late October, and the S&P 500 just capped its fifth straight winning month.

36 minutes ago

NEW YORK, NEW YORK - FEBRUARY 03: Larry David, comedian, writer, actor, and television producer loo...

Alli Rosenbloom, CNN

Don’t bother Larry David with menial pleasantries. He’s not interested

Just like the version of himself that he plays on “Curb Your Enthusiasm,” there are some things in life that Larry David can’t be bothered with.

51 minutes ago

FILE - President Joe Biden, accompanied by first lady Jill Biden blows his whistle for the start of...

Darlene Superville, Associated Press

The White House expects about 40,000 participants at its ‘egg-ucation’-themed Easter egg roll

The White House says it's getting ready to welcome 40,000 people to its annual Easter Egg Roll.

1 hour ago

FILE: A Polestar electric car prepares to park at an EV charging station on July 28, 2023 in Corte ...

Alexa St. John, Matthew Daly and Joshua A. Bickel

Federal EV charging stations are key to Biden’s climate agenda, yet only 4 states have them

President Biden has set a goal of creating a national network of 500,000 publicly available chargers by 2030.

4 hours ago

A new draft law looks to prohibit the breeding of dogs with “skeletal anomalies,” such as dachs...

Nadine Schmidt, Claudia Otto and Frederik Pleitgen, CNN

Dachshunds under threat as Germany proposes ban on breeding

No more dachshunds? A new draft law looks to prohibit the breeding of dogs with “skeletal anomalies.”

6 hours ago

The cargo ship Dali sits in the water after running into and collapsing the Francis Scott Key Bridg...

Nick Perry

What to know about the cargo ship Dali, a mid-sized ocean monster that took down a Baltimore bridge

Here’s what to know about the cargo ship Dali, which crashed into Baltimore’s Francis Scott Key Bridge, causing it to collapse and leaving six construction workers presumed dead.

8 hours ago

Sponsored Articles

Women hold card for scanning key card to access Photocopier Security system concept...

Les Olson

Why Printer Security Should Be Top of Mind for Your Business

Connected printers have vulnerable endpoints that are an easy target for cyber thieves. Protect your business with these tips.

Modern chandelier hanging from a white slanted ceiling with windows in the backgruond...

Lighting Design

Light Up Your Home With These Top Lighting Trends for 2024

Check out the latest lighting design trends for 2024 and tips on how you can incorporate them into your home.

Technician woman fixing hardware of desktop computer. Close up....

PC Laptops

Tips for Hassle-Free Computer Repairs

Experiencing a glitch in your computer can be frustrating, but with these tips you can have your computer repaired without the stress.

Close up of finger on keyboard button with number 11 logo...

PC Laptops

7 Reasons Why You Should Upgrade Your Laptop to Windows 11

Explore the benefits of upgrading to Windows 11 for a smoother, more secure, and feature-packed computing experience.

Stylish room interior with beautiful Christmas tree and decorative fireplace...

Lighting Design

Create a Festive Home with Our Easy-to-Follow Holiday Prep Guide

Get ready for festive celebrations! Discover expert tips to prepare your home for the holidays, creating a warm and welcoming atmosphere for unforgettable moments.

Battery low message on mobile device screen. Internet and technology concept...

PC Laptops

9 Tips to Get More Power Out of Your Laptop Battery

Get more power out of your laptop battery and help it last longer by implementing some of these tips from our guide.

Stocks Sink Again On Wall Street As Inflation Worries Mount