US stocks fell early in trading on Thursday as investors picked up hot inflation data, which showed that price levels remained higher in April, signaling that the Federal Reserve could make more aggressive efforts to fight inflation.
The S&P 500 fell 1% after the index hit 3,935.18, or its lowest level since March 2021 in the previous session. The S&P 500 fell more than 17% in the first 90 trading days of 2022, marking its second worst start to the year, according to Compound Capital Advisors. The Dow Jones Industrial Average fell 250 points, or 0.8 percent, and the Nasdaq Composite fell 1.7 percent.
The moves are based on a series of sharp losses in the stock markets and followed Wednesday’s April consumer price index (CPI), which showed inflation that remained near a 40-year high despite a slight retreat from the previous month. In addition, the so-called basic price index, which excludes volatile food and energy categories, turned out to be higher than economists had expected, raising concerns among investors that higher prices could continue.
The April picture of US inflation comes as investors assess how aggressively the Federal Reserve will intervene to control rising price levels through monetary tightening, including rising interest rates. Uncertainty over the central bank’s next move has caused turmoil in risky assets, sending all three major indices to their lowest trading levels in a year.
“Inflation seems to be fixed in many areas of the economy, and whether or not we have witnessed a peak in inflation, a steady slow decline will be more problematic for the Fed to cool inflation while driving the economy into recession,” said Charlie Ripley. investment strategist at Allianz Investment Management, said in a note sent by email on Wednesday.
Cleveland Fed Chairman Loretta Mester told Yahoo Finance on Tuesday that interest rates are likely to rise by 50 basis points in the next two Federal Reserve policy-making meetings, while leaving an increase of 75 basis points on the table as the central bank increases its inflation – mitigation efforts.
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“It will undoubtedly be a challenge because there are things that are happening on both the supply and demand sides,” said Mester. “But the risks of inflation remaining high become even more risky as we move forward due to inflation expectations, so it’s really important to commit to doing what we need to do.”
Peter Essel, head of portfolio management at the Commonwealth Financial Network, said that if inflation fell in the second half of the year, there would be less pressure on the Fed to fight rising price levels with aggressive monetary policies, “which leaves open the possibility of a soft landing in the economy as opposed to the collapse and burnout that markets have been pricing lately. “
“The second half of the year could be a strong period for stocks and bonds if inflation continues to slow and the scale of interest rates rises below expectations,” Essel said in a note. “Currently, investors are pricing in a doomsday scenario with inflation and they lack the forest for the trees.”
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9:30 a.m. ET: S&P 500 drops 1%, Dow drops 250 points, Nasdaq drops 1.7%
Here are the main movements of the markets at the opening on Thursday:
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S&P 500 (^ GSPC): -31.73 (-0.81%) to 3,903.45
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Dow (^ DJI): -168.41 (-0.53%) to 31,665.70
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Nasdaq (^ IXIC): -136.71 (-1.20%) to 11,227.52
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Crude oil (CL = F): $ +0.10 (+ 0.09%) to $ 105.81 per barrel
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Gold (GC = F): – $ 7.10 (-0.38%) to $ 1846.60 per ounce
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10-year treasury (^ TNX): -7.8 bps for 2.8430% yield
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9:15 a.m. ET: US producer prices continue to rise as inflationary pressures continue
Wholesale inflation rose again in April, indicating that higher consumer prices may last longer than expected.
The producer price index for final demand rose 11% from April last year and 0.5% on a monthly basis, driven by higher commodity costs, according to data from the Ministry of Labor on Thursday. These figures also follow remarkable revisions up the March figures.
“Producer price inflation slowed slightly in April, but still remains historically high, with nothing to dissuade the Federal Reserve from more interest rate hikes in April,” Comerica Bank chief economist Bill Adams said in a note. . “The Fed will want to see clearer evidence that inflation is cooling and higher interest rates are slowing demand before they start thinking about the end of the current interest rate cycle.”
The so-called core PPI, which excludes volatile food and energy components, rose 0.4% from a month earlier, up 8.8% from the same period last year. The measure rose at a slower pace than expected, but the figure for March was revised to 1.2% in advance.
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9:07 a.m. ET: New unemployment claims rise unexpectedly, but stay close to 200,000
Unemployment claims rose unexpectedly for the first time in recent weeks, but remained close to the pre-pandemic lows as a strong labor market and rising unemployment remain a bright spot in the US economy.
The latest weekly report on unemployment claims from the Ministry of Labor shows that in the week ending May 7, 203,000 lawsuits were filed, which is less than 192,000 economists polled by Bloomberg.
“It’s probably unrealistic to expect it to fall well below 200,000,” Ted Rosman, a senior industry analyst at Bankrate, said in a note. “Generally speaking, the labor market is still a source of strength in an economy fraught with concerns about inflation, higher interest rates and more.
Given the jump and then decline in unemployment applications, the Ministry of Labor has also reconfigured the way it adjusts weekly data to take into account seasonal factors. Since last week, the Ministry of Labor has returned to the use of “multiplicative” seasonal corrective factors for the data. For most of the pandemic, the department has used “additional” seasonal adjustments to help smooth out large fluctuations in weekly numbers.
The 4-week moving average was 192,750, an increase of 4,250 from the revised average of the previous week, according to the Ministry of Labor.
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7:15 a.m. ET: Futures fall as sales continue amid inflation, interest rate worries
Here are the main movements in early futures trading on the Thursday before the market opened:
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S&P 500 futures (ES = F): -16.00 (-0.41%) to 3,914.25
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Dow futures (YM = F): -90.00 (-0.28%) to 31,653.00
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Nasdaq futures (NQ = F): -90.25 (-0.75%) to 11,879.50
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Crude (CL = F): $ -1.35 (-1.28%) to $ 104.36
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Gold (GC = F): – $ 6.80 (-0.37%) to $ 1846.90 per ounce
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10-year treasury (^ TNX): 0.00 bps for 2.9210% yield
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6:30 a.m. ET: Grocery delivery platform Instacart files for IPO
Instacart Inc., the largest online food delivery service in the United States, has submitted confidential documents for initial public offering, according to a report by Bloomberg News.
The company reportedly works with banks, including Goldman Sachs Group Inc. and JPMorgan Chase & Co. on the go, according to Bloomberg, citing people familiar with the issue who said the listing could happen as early as this year, although the weather may change.
Instacart, which rose sharply during the pandemic when people turned to online grocery shopping, reported a recent slowdown after the COVID boom as consumers returned to personal visits to the supermarket.
The company revealed in March that it was reducing its valuation by about 40% to $ 24 billion. Previously, Instacart was valued at $ 39 billion in funding in March 2021 by companies including Andreessen Horowitz, Sequoia Capital and D1 Capital Partners, as well as Fidelity Management & Research Co. and T. Rowe Price Associates Inc, Bloomberg reported.
A smartphone with the Instacart logo shown can be seen in this illustration, made on March 25, 2022. REUTERS / Dado Ruvic / Illustration
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18:14 ET Wednesday: Futures on stocks rise after long losses in stocks
Here’s where stock futures were in extended trading ahead of Wednesday’s overnight session:
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S&P 500 futures (ES = F): +10.75 (+ 0.27%) to 3941.00
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Dow futures (YM = F): +76.00 (+ 0.24%) to 31,819.00
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Nasdaq futures (NQ = F): +30.50 (+ 0.25%) to 12,000.25
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Crude crude (CL = F): + $ 0.02 (+ 0.02%) to $ 105.73
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Gold (GC = F): – $ 1.90 (-0.10%) to $ 1851.80 per ounce
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10-year treasury (^ TNX): -7.2 bps for 2.9210% yield
A trader works on the floor of the New York Stock Exchange NYSE in New York, United States, May 5, 2022. US stocks fell on Thursday as heavy sales rose on Wall Street. The Dow Jones Industrial Average fell 1,063.09 points, or 3.12 percent, to 32,997.97 points. The S&P 500 fell 153.30 points, or 3.56 percent, to 4,146.87. The Nasdaq Composite Index fell 647.17 points, or 4.99 percent, to 12,317.69. (Photo by Michael Nagle / Xinhua via Getty Images)
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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