Wall Street Close: Benchmarks down over 2.0% as bears cheer US inflation outcome

US CPI triggered equity selloff, S&P 500, DJI drop the most since February, January respectively.
US Treasury yields marked the heaviest jump in two months, mega-cap stocks lost the most.
US PPI, Retail Sales awaited for clear direction.

Anil Panchal FXStreet

US stocks portrayed market fears from the strong inflation data by dropping for the third consecutive day on Wednesday. The US Consumer Price index (CPI) for April crossed feared figures and challenged the Federal Reserve (Fed), not to ignore future easy money.

The 4.6% YoY CPI figure, versus 3.6% expected, tested the highest since 2008 and propelled the US 10-year Treasury yields the most since mid-March. The same helped the US dollar index (DXY) to print the biggest gains of May while refreshing the weekly top. Following the data, Fed's Vice Chair Richard Clarida and Atlanta Federal Reserve President Raphael Bostic tried to placate bears but failed.

Read: Breaking: US annual CPI inflation jumps to 4.2% in April

Against this backdrop, Dow Jones Industrial Average (DJI30) dropped the most since late January, down 1.99% or 681.50 points to 33,587.66 whereas S&P 500 slumped 2.15% daily loss, the heaviest since February, to end Wednesday’s North American session around 4,062. Notably, Nasdaq became the biggest loser among the key benchmarks with 2.67% south-run, or 357.22 points.

While the jump in inflation raised concern for the Fed’s easy money policies and more fiscal stimulus, technology stocks were leading the losing army. Among them, the giants like Apple, Amazon, Facebook, Tesla and Alphabet weighed down the benchmarks. It should, however, be noted that S&P 500 Energy benefited from the geopolitical tension between Israel and Palestine, in addition to the Colonial Pipeline closure.

The market gauge of anxiety, the CBOE Volatility Index (VIX), jumped to the highest in 10 weeks during the data-packed day.

Looking forward, investors will seek more clues to pamper the bears and hence Thursday’s US Producer Price Index (PPI), followed by Friday’s Retail Sales, will be the key to follow. Although recent inflation data raised serious challenges for the Fed, it is a one-time knocking and hence the US central bank could find ways to defend, also please the markets if incoming data helps.

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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