(Bloomberg) — U.S. stocks slumped for a third day and bonds yields climbed after a report showed inflation rose more than forecast, adding to concern that price pressures will stifle a recovery in the world’s biggest economy.
The technology sector continues to lead the retreat in equities, with Apple and Microsoft pacing declines in the Nasdaq 100. Cathie Wood’s ARK Innovation ETF resumed its slide, bringing this year’s loss to about 18%. After closing at a record high on Friday, the benchmark S&P 500 slumped the most since Feb. 25. The dollar strengthened again most of its major peers with Treasury yields climbing.
“The CPI data point feeds into a myopic narrative that the U.S. is overheating and the Fed is one step away from tightening,” said Mike Bailey, director of research at FBB Capital Partners. “Bears will feast on this tightening theme in the short term, but my sense is inflation will prove fleeting and markets will revert back to a more bullish view of moderate growth and lower risk of Fed tightening until we get to a full recovery.”
European stocks closed mostly higher, lifted by optimism about economic re-openings and booming commodities.
The debate over whether inflation will be persistent enough to force the Federal Reserve to tighten policy sooner than current guidance suggests comes as abundant stimulus has powered a rally in global equities, raising concerns valuations had become expensive. Fed Vice Chair Richard Clarida says he was surprised by the rise in consumer prices and “we would not hesitate to act” to bring inflation down to its goals if needed.
The consumer price index increased 0.8% from the prior month after a 0.6% gain in March. Excluding the volatile food and energy components, the so-called core CPI rose 0.9% from March.
“With inflation numbers coming in even higher than expected — even taking into account base effects — it’s going to have the market re-evaluating its view on rates,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “The bond market has been surprisingly sanguine about rising inflation pressures and eventually it’s going to have to acknowledge that current rates are too low.”
Copper and iron ore were on course for new records amid a broadening commodities boom. Oil was steady above $65 per barrel. The biggest U.S. pipeline is still closed in the wake of a cyberattack, leading to acute fuel shortages in some parts of the nation.
MLIV’s Question of the Day: How Priced In Is a European Reopening?
These are some of the main moves in markets:
Stocks
The S&P 500 fell 1.5%, falling for the third straight day, the longest losing streak since March 4 as of 12:03 p.m. New York timeThe Nasdaq 100 fell 2.4%, falling for the third straight day, the longest losing streak since May 5The Dow Jones Industrial Average fell 1.2%, falling for the third straight day, the longest losing streak since March 4The Stoxx Europe 600 rose 0.3%The MSCI World index fell 1.4%, more than any closing loss since March 4
Currencies
The Bloomberg Dollar Spot Index rose 0.6%, more than any closing gain since April 30The euro slipped 0.6%, more than any closing loss since April 30The British pound slipped 0.5%, more than any closing loss since April 30The Japanese yen slipped 0.8%, more than any closing loss since March 4
Bonds
The yield on 10-year Treasuries advanced six basis points, more than any closing gain since March 18Germany’s 10-year yield advanced four basis points, climbing for the sixth straight day, the longest winning streak since Feb. 8Britain’s 10-year yield advanced five basis points, more than any closing gain since March 12
Commodities
West Texas Intermediate crude rose 1.3%, climbing for the fourth straight day, the longest winning streak since April 15Gold futures fell 0.7% to $1,824 an ounce
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