U.S. Stocks Seeing Further Downside In Mid-Day Trading

After coming under pressure early in the session, stocks have seen further downside over the course of the trading day on Wednesday. The major averages are adding to the losses posted in the two previous sessions, with the S&P 500 falling to its lowest intraday level in a month.

In recent trading, the major averages have once again slid to new lows for the session. The Dow is down 458.74 points or 1.3 percent at 33,810.42, the Nasdaq is down 308.81 points or 2.3 percent at 13,080.62 and the S&P 500 is down 66.13 points or 1.6 percent at 4,085.97.

The sell-off on Wall Street reflects concerns about the accelerating pace of inflation 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.

The much bigger than expected jump in core consumer prices reflected the largest increase since April of 1982.

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 has raised 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.”

Michael Pearce, Senior U.S. Economist at Capital Economics, described the numbers as “scary” but said muted gains in the cyclical components of the consumer price index lend weight to the Federal Reserve’s argument that the surge in inflation in April will be “largely transitory.”

“With employment still more than 8 million short of its pre-pandemic level, we expect the Fed to maintain its dovish line, even if, as we expect, inflation gains broaden out over the coming months,” Pearce said.

Sector News

Semiconductor stocks continue to turn in some of the market’s worst performances in mid-day trading, with the Philadelphia Semiconductor Index plunging by 3.5 percent.

Computer hardware, networking and software stocks also continue to see significant weakness, contributing to the steep drop by the tech-heavy Nasdaq.

Substantial weakness has also emerged among steel stocks, as reflected by the 3.3 percent nosedive by the NSYE Arca Steel Index. The index ended the previous session at its best closing level in almost ten years.

Housing, retail and airline stocks are also seeing considerable weakness on the day, while energy stocks are bucking the downtrend amid a sharp increase by the price of crude oil.

With crude for June delivery jumping $1.04 to $66.32 a barrel, the Philadelphia Oil Service Index and the NYSE Arca Oil Index are spiking by 3.3 percent and 2.9 percent, respectively.

Other Markets

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 all moved to the upside on the day. While the U.K.’s FTSE 100 Index advanced by 0.8 percent, the German DAX Index and the French CAC 40 Index both edged up by 0.2 percent.

In the bond market, treasuries have moved notably lower amid the concerns about rising inflation. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 5.7 basis points at 1.681 percent.