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

Top Stories

National News

Clarence Gilyard Jr. has died at the age of 66. (Arlene Richie/Shutterstock)...
Toyin Owoseje, CNN

Clarence Gilyard, ‘Die Hard’ and ‘Walker, Texas Ranger’ star, dead at 66

Clarence Gilyard, the actor best known for playing computer hacker Theo in "Die Hard" and naval flight officer Marcus "Sundown" Williams in "Top Gun," has died at the age of 66.
15 hours ago
Sen. Mitt Romney (R-UT) speaks during a Senate Health, Education, Labor, and Pensions Committee hea...
Michael Houck

Mitt Romney calls Trump a ‘gargoyle’ after dinner with Ye, Nick Fuentes

Utah Senator Mitt Romney called former President Donald Trump a gargoyle hanging over the Republican party after his dinner with white supremacist Nick Fuentes and rapper Ye.
15 hours ago
Tea time and Christmastime coincide at The Plaza's elegant Palm Court, where three holiday tea menu...
Marnie Hunter, CNN

15 luxury hotels that go all out for Christmas

These luxury hotels have the most glamorous Christmas decorations of the season.
15 hours ago
BRUSSELS, BELGIUM - OCTOBER 13: Defence ministers and delegates are seen at the start of the North ...
STEPHEN McGRATH, LORNE COOK and ELLEN KNICKMEYER, Associated Press

NATO renews membership vow to Ukraine, pledges arms and aid

NATO Secretary-General Jens Stoltenberg says war-torn Ukraine will one day become a member of the world’s largest security alliance
15 hours ago
The McGold Card is back at McDonald's. (McDonald's)...
Jordan Valinsky, CNN Business

McDonald’s is giving people the chance to win free food for life

Beginning December 5, every order completed in the McDonald's app for at least $1 will enter customers into a contest to win a McGold Card.
15 hours ago
A woman in Minnesota loses peripheral vision from apparent exposure to mercury in beauty creams.
(T...
Meera Senthilingam, CNN

Mother loses peripheral vision from apparent exposure to mercury in beauty creams

A woman in Minnesota lost part of her vision and inadvertently put her entire household at risk of mercury poisoning, most likely from using beauty creams.
15 hours ago

Sponsored Articles

house with for rent sign posted...
Chase Harrington, president and COO of Entrata

Top 5 reasons you may want to consider apartment life over owning a home

There are many benefits of renting that can be overshadowed by the allure of buying a home. Here are five reasons why renting might be right for you.
Festive kitchen in Christmas decorations. Christmas dining room....
Lighting Design

6 Holiday Decor Trends to Try in 2022

We've rounded out the top 6 holiday decor trends for 2022 so you can be ahead of the game before you start shopping. 
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to choose what MBA program is right for you: Take this quiz before you apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Diverse Group of Energetic Professionals Team Meeting in Modern Office: Brainstorming IT Programmer...
Les Olson

Don’t let a ransomware attack get you down | Protect your workplace today with cyber insurance

Business owners and operators should be on guard to protect their workplace. Cyber insurance can protect you from online attacks.
Hand turning a thermostat knob to increase savings by decreasing energy consumption. Composite imag...
Lighting Design

5 Lighting Tips to Save Energy and Money in Your Home

Advances in lighting technology make it easier to use smart features to cut costs. Read for tips to save energy by using different lighting strategies in your home.
Portrait of smiling practitioner with multi-ethnic senior people...
Summit Vista

How retirement communities help with healthy aging

There are many benefits that retirement communities contribute to healthy aging. Learn more about how it can enhance your life, or the life of your loved ones.
Stocks Sink Again On Wall Street As Inflation Worries Mount