The US stock market closed down for the third straight session on Wednesday, 12 May 2021, as a faster-than-expected rise in consumer prices in April rekindled concerns that the Federal Reserve tightens monetary policy sooner than current guidance.
At the close of trade, the Dow Jones Industrial Average index tumbled 681.50 points, or 1.99%, to 33,588. The S&P 500 index was down 89.06 points, or 2.14%, at 4,063. The tech-heavy Nasdaq Composite Index fell 357.75 points, or 2.67%, to 13,032.
Total ten out of 11 major S&P 500 sectors closed lower, with consumer discretionary (down 3.28%), information technology (down 2.86%), materials (down 2.54%), realty (down 2.37%), utilities (down 2.35%), and industrials (down 2.44%) sectors being notable losers, while energy sector eked out 0.06% gains.
The Labor Department said on Wednesday that its consumer price index rose 0.8% in April, and 4.2% year-on-year, the fastest pace since 2008- outpacing a 0.2% forecast. The gyrations in financial markets underscored concerns among some investors that the Federal Reserve could be wrong in its prediction that inflation pressures in the United States are temporary, and that the central bank may have to raise rates sooner than it expects.
Investors continued to shun growth stocks like technology, which have higher valuations that are less attractive in an inflationary environment, where money today is worth more than money in the future. Google, Apple, Amazon, and Microsoft fell more than 2%. While Facebook shares fell 1%.
ECONOMIC NEWS: US Consumer Prices Climb 0.8% In April-US consumer price index climbed by 0.8% in April after rising by 0.6% in March, the Labor Department reported on Wednesday.
With the much bigger than expected monthly increase, consumer prices in April were up by 4.2% compared to the same month a year ago, reflecting the biggest jump since September of 2008. The stronger-than-expected consumer price growth in April was partly due to the spike in prices for used cars and trucks, which soared by a record 10.0% and accounted for more than a third of the increase by the consumer price index. Food prices also rose by 0.4% during the month, while energy prices edged down by 0.1% after skyrocketing in recent months. Excluding food and energy prices, core consumer prices advanced by 0.9% in April following a 0.3% uptick in March. Core prices were expected to rise by another 0.3%.
Among Indian ADR, HDFC Bank fell 1.08% to $68.45, ICICI Bank fell 3.92% to $15.92, WNS Holdings fell 3.13% to $67.79, and INFOSYS fell 1.92% to $17.84. Wipro fell 3.44% to $7.29, Dr Reddys Labs fell 0.42% to $71.47, and Vedanta fell 3.51% to $15.14. Tata Motors added 0.23% to $21.40.