Stocks churned, they are closed; Yields fall after US inflation data

NEW YORK (Reuters) – Wall Street stocks ended sharply lower and Treasury yields fell in a volatile session on Wednesday, as oil prices rose and investors worried about a possible economic slowdown.

US stock indices traded up and down during the volatile session as investors opted for US inflation data for clues about the path of the Federal Reserve’s rate hike.

US data showed core inflation higher than expected, excluding items such as oil prices. Some investors were encouraged by the change in annual consumer price growth to 8.3% in April from 8.5% in March although it was above analysts’ estimate of 8.1%. Read more

While some investors were encouraged by the annual improvement, others noted that inflation remains very hot and that this was highlighted by the rally in oil futures.

“This is all about recession concern. The inflation numbers we got this morning weren’t good, worse than expected…There is a rise in food prices and growing concerns that inflation numbers are going to be flat on the high side,” said Tim Greske. , chief portfolio strategist at Ingalls & Snyder.

The strategist also pointed to a flat yield curve, citing the difference between long- and short-term Treasury yields as an ominous sign.

“We have a very flat yield curve that has tended to invert. This scares traders about the prospects of a recession. There are a lot of investors who think the Fed can engineer a smooth landing. And that looks increasingly doubtful.”

The Dow Jones Industrial Average fell 326.63 points, or 1.02%, to 31,834.11 points, the Standard & Poor’s 500 lost 65.87 points, or 1.65%, to 3935.18 points, and the Nasdaq Composite Index fell 373.44 points, or 3.18%, to 11,364.24.

The S&P 500 closed at its lowest level since March 25, 2021 and 18% below its record end on January 3. The Nasdaq fell sharply from its peers as the interest rate sensitive growth sectors, technology (.SPLRCT) and consumer appreciation (.SPLRCD), underperformed the rest of the market, also closing down more than 3%.

The MSCI Worldwide Stock Index (.MIWD00000PUS) fell 0.88%, hitting its lowest close since November 2020.

Earlier, Jim Poulsen, chief investment strategist at The Leuthold Group in Minneapolis, took the half-full view noting that inflation, while still high, appeared to be moderating.

“At the end of the day, we can all get excited about whether it’s a little higher or a little lower but the annual inflation rate has clearly flipped and appears to have peaked in March. It looks like it’s rounded a corner,” he said.

The US dollar initially rose after inflation news eased, but rose slightly in late trading. Read more

The dollar index, which measures the greenback against a basket of major currencies, was 0.067%, with the euro slipping 0.13% to $1.0513.

The Japanese yen strengthened 0.35% against the dollar at 129.97 per dollar, while the British pound was last traded at $1.2245, down 0.62% on the day.

In early trade, 10-year Treasury yields fell to their lowest in a week. But after the inflation data, yields soared toward a three-year high of 3.203% hit on Monday before dropping again.

Prices for benchmark 10-year notes rose 20/32 to 2.9148% from 2.993% late Monday. The price of the 30-year note rose 57/32 to a yield of 3.026%, from 3.129% while the price of the two-year note fell 1/32 to a yield of 2.6371%, from 2.623%. [nL2N2X31QZ]

“The volatility in all the markets is a really, really surprising aspect of the day,” said Lou Brien, market strategist at DRW Trading. “You see a bit of a flight to safety and maybe the idea that even with today’s CPI, we’re going to flatten the curve.”

Oil prices rose on Wednesday after Russian gas flows to Europe declined and Russia imposed sanctions on some European gas companies, adding to uncertainty in global energy markets.

US crude oil futures settled at $105.71 a barrel, up $5.95, or 5.96%, while Brent crude futures settled at $107.51 a barrel, up $5.05, or 4.93%.

And the spot gold price rose 0.8 percent to $ 1852.79 an ounce. [nL3N2X32VB]

(This story corrects the misrepresentation in paragraph 2.)

Additional reporting by Sinad Karo, Herb Lash and Caroline Valetkevich in New York, Danilo Masoni in Milan, Sujata Rao in London and Alon John in Hong Kong; Editing by William Maclean, Thomas Janowski, Angus McSwan and David Gregorio

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