U.S. Stocks May See Further Downside On Inflation Worries

After moving mostly lower over the two previous sessions, stocks are likely to see further downside in early trading on Wednesday. The major index futures are currently pointing to a lower open for the markets, with the Dow futures down by 183 points.

Concerns about the accelerating pace of inflation may continue to weigh on Wall Street following the release of the Labor Department’s report on consumer prices in the month of April.

The Labor Department said its consumer price index climbed by 0.8 percent in April after rising by 0.6 percent in March. Economists had expected consumer prices to inch up by 0.2 percent.

Excluding food and energy prices, core consumer prices also advanced by 0.9 percent in April following a 0.3 percent uptick in March. Core prices were expected to rise by another 0.3 percent.

With the much bigger than expected monthly increase, consumer prices in April were up by 4.2 percent compared to the same month a year ago, reflecting the biggest jump since September of 2008.

Core consumer prices also surged up by 3.0 percent year-over-year, marking the biggest annual increase since January of 1996.

The significantly faster price growth is likely to raise concerns about the outlook for monetary policy even though the Federal Reserve has repeatedly downplayed the risks of inflation.

The Fed has indicated that it won’t begin tightening monetary policy until inflation is moderately above its 2 percent target for “some time.”

Stocks moved mostly lower during trading on Tuesday, extending the pullback seen over the course of Monday’s session. The Nasdaq hit its worst intraday level in well over a month in early trading but rebounded to end the day only modestly lower.

After plunging as much as 2.2 percent, the tech-heavy Nasdaq closed down just 12.43 points or 0.1 percent at 13,389.43. Meanwhile, the Dow tumbled 473.66 points or 1.4 percent to 34,269.16 and the S&P 500 slid 36.33 points or 0.9 percent to 4,152.10.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index slumped by 1.6 percent, while China’s Shanghai Composite Index rose by 0.6 percent.

Meanwhile, the major European markets have all moved to the upside on the day. While the French CAC 40 Index is just above the unchanged line, the German DAX Index is up by 0.4 percent and the U.K.’s FTSE 100 Index is up by 0.7 percent.

In commodities trading, crude oil futures are climbing $0.67 to $65.95 a barrel after rising $0.36 to $65.28 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,828.50, down $7.60 compared to the previous session’s close of $1,836.10. On Tuesday, gold edged down $1.50.

On the currency front, the U.S. dollar is trading at 109.11 yen compared to the 108.62 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2109 compared to yesterday’s $1.2148.