Wednesday May 11th


Stock futures drop after April inflation report is hotter than expected, Nasdaq futures lose 1.5%

U.S. stock index futures were set to fall on Wednesday as a hotter-than-expected consumer prices report for April sent the 10-year Treasury yield back above 3%, raising concerns that inflation will remain high as the economy slows. The Nasdaq was set to see the worst of the selling as investors continued to dump tech shares as they have all year. S&P 500 futures were 1% lower after trading higher earlier in the overnight session. Nasdaq-100 index futures slid by 1.7%. Dow Jones Industrial Average futures dropped 230 points. April’s consumer price index showed an 8.3% jump, higher than the 8.1% increase expected by economists polled by Dow Jones. The price surge remained near the 40-year high pace of 8.5% seen in March. Core CPI, which does not include food and energy prices, gained 6.2% compared to expectations of 6%. On a monthly basis, headline CPI rose by 0.3% and core rose 0.6%. Rising prices have been front-of-mind, particularly as the Federal Reserve is hiking interest rates and trimming its balance sheet to address inflation. Following the release of the data, the 10-year Treasury yield jumped back above the 3% mark. The S&P 500 stands about 17% off its high in a pullback this year largely driven by fears of out-of-control inflation causing the Federal Reserve to aggressively tighten monetary policy. Tech shares came under pressure following the hot inflation report and subsequent jump in yields. Nvidia, Tesla, Amazon all traded in the red in premarket trading as investors continued to dump tech shares as rates rise. Apple and Microsoft were also in the red. On the earnings front, shares of Coinbase slumped nearly 16% premarket and Toyota dipped 4.4% on the back of earnings. Investors are looking ahead to reports Walt Disney, Rivian and Beyond Meat after the bell. Wednesday’s moves come after the Dow fell for a fourth consecutive day Tuesday in a volatile trading session, alternating between gains and losses. The S&P 500 ticked up 0.25% and the Nasdaq Composite gained about 1%. Mega-cap technology names, which have struggled in recent weeks, Tuesday’s gain as Microsoft and Apple each rose more than 1%. Shares in Asia-Pacific were mixed on Wednesday as investors watched for market reaction to the release of higher-than-expected Chinese inflation data for April. Mainland Chinese stocks led gains regionally, with the Shanghai Composite rising 0.75% to close at 3,058.70 while the Shenzhen Component climbed 1.803% to 11,109.48. Hong Kong’s Hang Seng index advanced 0.97% on the day to 19,824.57. Investor sentiment on Chinese stocks may have been lifted by positive developments on the mainland’s Covid situation. Elsewhere in the broader markets, the Nikkei 225 in Japan gained 0.18% to close at 26,213.64 while the Topix index shed 0.6% to 1,851.15. South Korea’s Kospi dipped 0.17%, finishing the trading day at 2,592.27. Oil rose on Wednesday after plunging nearly 10% in the last two sessions, buoyed by supply concerns as the European Union works on gaining support for a Russian oil embargo and flows of Russian gas to Europe through a key transit point in Ukraine dried up. The EU has proposed an embargo on Russian oil, which analysts say would further tighten the market and shift trade flows. A vote, which needs unanimous support, has been delayed as Hungary has dug in its heels in opposition. Brent crude was up $2.93, or 2.9%, to $105.39 a barrel, while U.S. West Texas Intermediate crude climbed $2.96, or 3%, to $102.73. Gold gave back some of its earlier gains Wednesday after the release of stronger-than-expected U.S. inflation data. Spot gold was last up just 0.16% at $1,841.16 per ounce. At one point earlier in the day, it was up more than 0.7%. Gold futures traded just below the flatline at $1,838.50 per ounce.