Wall Street sinks as inflation data spooks markets

The main indices on Wall Street fell at the opening bell on Wednesday after higher than expected US inflation data rattled traders.

In the first minutes of trading, the Dow Jones Industrial Average was down 0.4% at 34,131 while the S&P 500 dropped 0.68% to 4,123 and the Nasdaq sank 1.19% to 13,230.

The drop followed data that showed the US consumer price index rose 4.2% year on year in April, up from 2.6% in March and much higher than the forecast of 3.6%. It is the largest comparable increase since September 2008.

Used cars and trucks were a big part of the CPI increase, according to the Bureau of Labor Statistics.

The index for that sector rose 10% in April, the largest one month increase since the index began in 1953, and this accounted for over a third of the seasonally adjusted jump.

The news caused a jump in US 10 year Treasury yields, which rose to 1.643%, up from Tuesday’s close of 1.619%.

7:00am: Wall Street set for slow start

Wall Street is expected to get off to another downbeat start on Wednesday after yesterday’s torrid session saw heavy declines.

The Dow Jones Industrial Average futures are showing a 0.40% or 132 point decline to 34,137, while the S&P 500 is forecast to open 0.44% lower and the Nasdaq Composite 0.64%.

Much will depend on the latest US inflation figures, due at 8.30am ET.

Analysts expect the latest consumer price index to show a rise of 3.6% year on year in April, up from 2.6% in March. That would mark the highest figure since September 2011.

Sophie Griffiths, market analyst at Oanda, said: “US futures are trading lower for a third straight session as investors await today’s US CPI data. The equity market just can’t shake off these inflation jitters, which sent stocks to close firmly in the red again on Tuesday…

“A higher-than-forecast read could prompt bets that the Fed will move sooner to tighten policy pulling stocks, particularly tech stocks, sharply lower.”

Four things to watch for on Wednesday:

• Earnings today will include figures from South Korean ecommerce firm Coupang Inc (NYSE:CPNG), mobile technology group Applovin Corp (NASDAQ:APP) and web development software firm Wix.com ltd (NASDAQ:WIX)
• Shares in fast food chain Wendy’s Co (NASDAQ:WEN) will be in focus after the company raised its outlook for 2021
• Amazon Inc (NASDAQ:AMZN) may also draw some attention after an EU court ruled the ecommerce giant was wrongfully ordered to pay €250mln in back taxes
• On the macro front, aside from the US inflation data investors may also be keeping an eye on speeches from a couple of Fed representatives

Story by ProactiveInvestors