By Stephen Culp
NEW YORK (Reuters) – Wall Street lost ground on Wednesday as surging consumer prices fueled fears of a longer-than-expected wave of heightened inflation dampened investor risk appetite.
All three major U.S. stock indexes were in negative territory, extending their losses and adding to Tuesday’s sell-off which snapped the S&P 500’s and Nasdaq’s eight-session runs of all-time closing highs.
“This market got ahead of itself and decided to give back more today and give inflation as the reason behind backing and filling,” said Sam Stovall, chief investment strategist of CFRA Research in New York.
The Labor Department’s consumer price index (CPI), delivered a hotter-than-expected jump of 0.9% and the fastest year-on-year gain in 31 years.
The report hinted that the persistently tangled global supply chain could result in the current inflation wave taking longer to abate than many – including the U.S. Federal Reserve – had hoped.
“What do these numbers say? Simply that inflation is going to be long-lasting and structural inflation has picked up speed,” says Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“Inflation will peak probably in the beginning of the second quarter, and the over the next several months the Fed will have to change its tune a little bit and accelerate the pace of tapering, Cardillo added.
The graphic shows core CPI along with other indicators, many of which are drifting further away from the Fed’s average annual 2% inflation target.
(Graphic: Inflation: https://graphics.reuters.com/USA-STOCKS/dwpkrezjyvm/inflation.png)
The CBOE Volatility index a gauge of investor anxiety, touched its highest level in nearly one month.
The Dow Jones Industrial Average fell 185.46 points, or 0.51%, to 36,134.52, the S&P 500 lost 34.12 points, or 0.73%, to 4,651.13 and the Nasdaq Composite dropped 227.33 points, or 1.43%, to 15,659.21.
Of the 11 major sectors in the S&P 500, energy was the biggest percentage loser, while utilities were up the most.
Tech weighed heaviest on the bellwether index led by megacaps Apple Inc and Microsoft Corp.
Third-quarter earnings season has reached the final stretch, and of the companies having reported, 81% have beaten street expectations.
Walt Disney Co is expected to post quarterly results after the bell.
Tesla Inc rose 2.2%, reversing several sessions of declines in the wake of CEO Elon Musk’s polling Twitter users on whether he should sell 10% of his stake in the company he founded.
This, as rival electric vehicle maker Rivian Automotive Inc made its splash as a publicly traded company in an offering expected to raise nearly $107 billion. Its shares surged 25.859%.
Declining issues outnumbered advancing ones on the NYSE by a 1.89-to-1 ratio; on Nasdaq, a 2.18-to-1 ratio favored decliners.
The S&P 500 posted 25 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 82 new highs and 82 new lows.
(Reporting by Stephen Culp; additional reporting by Shreyashi Sanyal and Devik Jain in Bengaluru; editing by Diane Craft)
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