(Photo by Karen Bleier/AFP via Getty Images)
U.S. stocks plunged on Wednesday, extending the week’s declines as investors responded to news that the consumer-price index spiked higher in April.
The index rose 4.2% over the past 12 months, while the so-called core CPI recorded a gain of 3%.
The
dropped 682 points, or 2% — its largest percentage point drop since January. The
fell 2.1%, and the
declined 2.7% and is down more than 5% over the last three trading days. The 10-year Treasury yield rose to 1.695%.
Analysts and economists say part of the reason for the large year-over-year increase is the so-called base effect, which describes how a very low inflation reading in the year prior can lead to a relatively high reading in the following year if prices normalize. April 2020 saw a CPI of 0.8% amid a significant crash in the price of oil, when crude prices turned negative for the first time.
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“Consumer price inflation in every economy is telling us about the oil price a year ago,” said
Paul Donovan,
the chief economist at UBS Global Wealth Management. “This is not a concern, but markets want to worry about something.”
Rising prices can weigh on corporate profit margins if companies are unable to pass the costs on to consumers. They also can impact stock valuations, which tend to be lower when inflation is high. Tech stocks, in particular, are vulnerable because of their high valuations and the amount of growth expected in the future.
In Asia, Tokyo’s
fell 1.6% and Hong Kong’s
ticked up 0.8%. The
rose 0.6%, while in Taiwan the
tumbled 4%. The
in London was up 0.8%, while the
in Paris gained 0.2% and Frankfurt’s
was 0.2% higher.
The main U.S. stock indexes were weaker on Tuesday as well, as investors worried about the outlook for inflation and monetary policy.
“A number of reasons have been given for yesterday’s broad-based weakness, the main being concern that the recent sustained rise in commodities prices could prompt a sharper permanent state of rising inflation in the weeks and months ahead,” said Michael Hewson, an analyst at CMC Markets.
stock was a standout in Europe, up 8.6% after net income of €133 million ($161 million) in the quarter outpaced analyst expectations and the German bank hiked its full-year outlook.
Shares in
one of the world’s largest distillers and owner of brands including Johnnie Walker, Smirnoff, Captain Morgan, and Guinness, jumped 2.3%. The company said it expects organic operating profit growth to be at least 14% this fiscal year, ahead of organic sales growth.
Shares in
Taiwan Semiconductor Manufacturing Co.,
the world’s largest contract chip maker, fell 4.1%. TSMC dominates Taiwan’s stock market index with a 30% weighting, and was a significant force behind the TAIEX’s tumble.
(ticker: WEN) slipped 1.4%, giving up earlier gains, after reporting a profit of 20 cents a share, beating forecasts for 15 cents a share, on sales of $460 million, above expectations for $445 million.
(DKNG) stock slid 4.3% despite getting upgraded to Hold from Sell at Berenberg.
(NVAX) stock dropped 7.5% after getting downgraded to Neutral from Overweight at JPMorgan.
(DG) stock dropped 3.8% after getting downgraded to Sector Perform from Outperform at RBC Capital Markets.
(NLOK) stock gained 7.2% after getting upgraded to Buy from Underperform at Bank of America.
(DPZ) shares rose 0.8% after billionaire investor
Bill Ackman
revealed a stake in the company.
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