Wednesday May 12th

12-05-2021

Dow futures fall 200 points as data shows inflation running hotter than expected

U.S. stock index futures declined in early trading Wednesday following the Dow’s worst day since February as key inflation data showed higher-than-expected price pressures. Dow futures fell 200 points while S&P 500 futures traded 0.8% lower and Nasdaq 100 futures lost 1.2%. Inflation accelerated at its fastest pace since 2008 last month with the Consumer Price Index spiking 4.2% from a year ago, compared to the Dow Jones estimate for a 3.6% increase. The monthly gain was 0.8%, versus the expected 0.2%. Excluding volatile food and energy prices, the core CPI increased 3% from the same period in 2020 and 0.9% on a monthly basis. The respective estimates were 2.3% and 0.3%. Tech shares, which have been under pressure this week and this month, were falling in the premarket again Wednesday. Shares of Alphabet, Microsoft, Netflix, Facebook and Apple all traded in the red, while shares of chipmakers Nvidia and AMD were also lower in the premarket. Shares tied to the reopening also fell in the premarket. Carnival Corp, Boeing and United Airlines were lower in premarket trading. The technology sector pulled off a big intraday reversal in the previous session where the Nasdaq Composite erased a loss north of 2% and ended the day flat. The blue-chip Dow, however, lost more than 450 points to suffer its worst day since February. The S&P 500 slipped 0.9%, but avoided its second straight 1% loss. The Technology Select Sector SPDR is off by more than 1% this week and 3% this month, as investors reassess the group’s high valuations in the face of rising inflation. During Tuesday’s session, the CBOE Volatility Index, a measure of fear in the markets derived by option prices on the S&P 500, jumped as high as 23.73, levels not seen in two months. The VIX was higher in early trading Wednesday. “There seems to be modest concern over inflation as of late and that has been cited as the primary catalyst for recent weakness in global equities,” said Brian Price, head of investment management for Commonwealth Financial Network. Investors have grown worried about the threat of inflation; however, Federal Reserve Chair Jerome Powell has said any uptick in inflation should be transitory. Asia-Pacific shares were mostly down on Wednesday, as Taiwan’s markets tumbled after authorities said they may raise its Covid-19 alert level after an outbreak in recent days. The Taiwan Stock Exchange fell 4.11%. In Japan, the Nikkei 225 tumbled 1.61% to 28,147.51, while the Topix index fell 1.47% to 1,877.95. South Korea’s Kospi index fell 1.49% to close at 3,161.66. Mainland Chinese markets were mixed. The Shanghai composite closed 0.61% higher at 3,462.75, and the Shenzhen component rose 0.70% to close at 14,064.86. Hong Kong’s Hang Seng index rose 0.67% in the afternoon. Oil prices rose on Wednesday after a drop in U.S. crude inventories reinforced OPEC’s robust demand outlook, while the market awaited fresh updates on the Colonial Pipeline outage. U.S. West Texas Intermediate (WTI) crude futures rose 79 cents, or 1.2%, to trade at $66.04 per barrel, adding to a 36 cent rise on Tuesday. Brent crude futures climbed 74 cents, or 1% to $69.19 a barrel, adding to a 23 cent gain on Tuesday. Gold prices fell on Wednesday, weighed down by higher U.S. Treasury yields and a slight rebound in the dollar ahead of the much-awaited U.S. consumer price data due later in the day. Spot gold was down 0.4% at $1,829.94 per ounce by 0510 GMT. U.S. gold futures eased 0.3% to $1,830.30.