US stocks fell sharply on Wednesday afternoon as investors digested a key report on the state of US inflation, which was hotter than expected in most major metrics.
[Click here to read what’s moving markets on Thursday, May 12]
The S&P 500 fell more than 1.5%, erasing earlier gains of up to 1.2%. The index settled at 3,935.18, or its lowest level since March 2021. The Nasdaq fell more than 3% to end at 11,364.24, while the Dow edged lower more than 1% to close at 31,834.11. Treasury yields retook earlier gains and the benchmark 10-year yield fell back below 3%.
the movements came on the heels of the Labor Department’s April Consumer Price Index (CPI), which provided an update on price increases in the US economy. Although the report showed some slowdown in inflation compared to March, the rate of price increase was well above the estimates of many economists.
The CPI rose 8.3% in April from a year ago, down only marginally from March’s 8.5% increase. This had been the fastest rate in about 40 years. Consensus economists had expected an 8.1% increase in April, according to Bloomberg.
Much of this slowdown occurred as a result of a moderation in energy prices. But excluding the volatile food and energy categories, core CPI slowed only modestly in April compared with March. The core CPI rose 6.2% last month from a year earlier, following a 6.5% rise in March. It was also a warmer than expected 6.0% increase.
The latest inflation data helps inform how far the Federal Reserve will have to go to raise interest rates and tighten monetary policies to curb rising prices. Uncertainty about the Fed’s next moves, and whether those moves will reduce inflation while avoiding triggering a recession, has fueled higher volatility among risk assets, sending the S&P 500 down nearly 17% from its record high recent January 3. Shares dipped briefly on Tuesday afternoon Cleveland Fed President Loretta Mester said she saw the case for raising interest rates by 50 basis points. at the Fed’s next two meetings, leaving the door open for a potentially larger rate hike of 75 basis points.
The story continues
“We’re going to see more volatility. This is not going to be an easy road to follow as we still have a lot of unknowns,” Omar Aguilar, Schwab’s chief asset management and chief investment officer, told Yahoo Finance Live on Tuesday. “There’s still a lot of uncertainty in many parts, not only in the macroeconomic and economic structure, but also geopolitically, things that haven’t been resolved, like the war in Ukraine and just the COVID situation in China.”
Others also suggested that investors should prepare for higher volatility in the near term.
“We finally started to see some signs of panic over the last week or so, obviously late last week and into Monday,” Scott Brown, technical market strategist at LPL Financial, told Yahoo Finance Live on Tuesday. “But we’re a little bit skeptical that we’re actually at the bottom. It doesn’t mean we have to go much lower. But we look at a lot of things, whether it’s call ratios. being extreme, the VIX going above 40.. . They’re not really as extreme as we would normally see in a minor correction of this magnitude.”
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4:09 PM ET: Stocks end strongly lower, erasing early gains
Here’s where the markets ended the trading day on Wednesday:
S&P 500 (^GSPC): -65.87 (-1.65%) to 3,935.18
Dow (^DJI): -326.63 (-1.02%) to 31,834.11
Nasdaq (^IXIC): -373.44 (-3.18%) up to 11,364.24
Crude (CL=F): +$5.33 (+5.34%) to $105.09 a barrel
Gold (GC=F): +$11.40 (+0.62%) to $1,852.40 per ounce
10-year treasury (^TNX): -7.2 bp for a return of 2.9210%
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9:32 am ET: Stocks open lower as investors digest inflation data
Here were the top market moves as of 9:32 a.m. ET:
S&P 500 (^GSPC): -10.85 (-0.27%) to 3,990.20
Dow (^DJI): -3.09 (-0.01%) to 32,157.65
Nasdaq (^IXIC): -37.78 (-0.32%) up to 11,699.89
Crude (CL=F): +$4.28 (+4.29%) to $104.04 a barrel
Gold (GC=F): +$6.30 (+0.34%) to $1,847.30 per ounce
10-year treasury (^TNX): +4.3 bp for a return of 3.0360%
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8:50 am ET: CPI hits a higher-than-expected 8.3% y/y in April
US consumer prices rose at a slightly slower pace in April compared to March. although persistent supply disruptions still kept inflation close to its highest level in 40 years. And core consumer prices rose more than expected, even as they slowed from March, suggesting that inflationary trends underlying the entire economy remained warm.
The Consumer Price Index (CPI) for April from the Bureau of Labor Statistics it increased by 8.3% in April compared to last year, down from the 8.5% advance in March. That promotion had marked the fastest rate since 1981. Consensus economists had expected an 8.1% increase in April, according to Bloomberg.
In month-on-month terms, the broader CPI measure rose 0.3%, compared with a 1.2% increase in March. Excluding food and energy, core CPI also slowed slightly in April compared to March. The core CPI rose 6.2% last month from a year earlier, following a 6.5% rise in March. And in month-on-month terms, the core CPI rose 0.3%, compared to the expected rate of 0.4%.
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7:45am ET: Mortgage applications rise for straight week despite rate hike
The volume of mortgage applications in the United States rose last week for the second week in a row, even as mortgage rates rose to their highest levels in more than a decade.
The Mortgage Bankers Association’s weekly index of mortgage applications rose 2.0% in the week ended May 6, according to the firm’s latest weekly report on Wednesday at morning Purchase requests led the way higher, with these increasing 5% week-on-week on a seasonally adjusted basis. However, on a non-seasonally adjusted basis, purchase requests were 8% lower compared to the same week last year. And refinancing applications were down 2% from the previous week and 72% from the same week last year.
“The rise in mortgage applications last week was driven by a strong increase in application activity for conventional and government purchase loans, even as mortgage rates rose to their highest level high, 5.53%, since 2009,” said Joel Kan, associate vice president for economics at MBA. and industry forecasting, he said in a press release. “Despite a slow start to this year’s spring home buying season, prospective buyers are showing some resistance to higher rates. Buying activity has now increased for two straight weeks.”
“The rapid rise in mortgage rates continues to weigh on the refinancing market, with activity down 70% from a year ago,” Kan added. “Most homeowners refinanced at lower rates in the past two years.”
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7:38 a.m. ET Wednesday: Stock futures rise as investors await inflation data
Here’s where the markets were trading Wednesday morning:
S&P 500 futures (IS=F): +45.75 points (+1.14%) up to 4,042.50
Dow futures (YM=F): +282.00 points (+0.88%) up to 32,369.00
Nasdaq Futures (NQ=F): +182.75 points (+1.48%) up to 12,531.75
Crude (CL=F): +$3.99 (+4.00%) to $103.75 a barrel
Gold (GC=F): +$11.30 (+0.61%) to $1,852.30 per ounce
10-year treasury (^TNX): -6.1 bp for a return of 2.932%
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6:15 PM ET Tuesday: Stock futures hold ahead of CPI data
Here’s where the markets were trading on Tuesday evening:
S&P 500 futures (IS=F): -6 points (-0.15%) up to 3,990.75
Dow futures (YM=F): -44 points (-0.14%) up to 32,043.00
Nasdaq Futures (NQ=F): -21 points (-0.17%) up to 12,328.00
NEW YORK, NEW YORK – MAY 5: Traders work on the floor of the New York Stock Exchange during morning trading on May 5, 2022 in New York City. Stocks opened lower this morning after closing at a high on Wednesday after the Federal Reserve announced a half-percentage point hike in interest rates in an effort to further reduce inflation. (Photo by Michael M. Santiago/Getty Images)
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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