Stocks Fall as Inflation Worries Weigh on Markets
3:18 pm Thursday, May 12th, 2022
U.S. stocks dropped Thursday, extending a streak of volatility in a market driven by worries that the Federal Reserve will hamper growth in its effort to bring inflation under control.
The S&P 500 is getting held back predominately by the information technology and financials sectors, although the utilities sector is the weakest link. The heavily-weighted information technology sector is being undercut by weakness in Apple (AAPL) and Microsoft (MSFT).
The consumer discretionary sector (+1.0%) stands atop the standings, thanks to some relief in Amazon.com (AMZN), which set a 52-week low earlier today.
Growth concerns, which are more evident in the Treasury market, have been reinforced by news of Russia threatening retaliation if Finland follows through on plans to join NATO, the IEA lowering its global growth oil demand forecast, and Walt Disney (DIS) acknowledging that Disney+ subscriber growth will slow down in the second half of the year.
The 10-yr yield, which is sensitive to expectations for economic growth, is currently down seven basis points to 2.85% after hitting 3.20% early this week. Safe-haven positioning and renewed hope for peak inflation are other likely contributing factors to the decline.
On inflation, the Producer Price Index for April was largely in-line or better than expected, but the positive takeaway was that it showed a moderation in year-over-year increases even though producers were still burdened by high prices. The index for final demand increased 0.5%, as expected, taking the yr/yr increase to 11.0% (versus 11.5% in March).
Some other relatively positive news (that contributed to some early short-covering activity) include St. Louis Fed President Bullard (FOMC voter) saying he doesn’t think there’s a need to hike rates by 75 basis points right now and Treasury Secretary Yellen, according to CNBC, saying she doesn’t think the stable coin losses will cause systemic issues for the financial system.
The fed-funds-sensitive 2-yr yield is down seven basis points to 2.57%. The U.S. Dollar Index is up 0.8% at 104.85 to trade at a 20-year high. WTI crude futures are up 1.0% to $106.70/bbl despite the reduced forecast from the IEA.
Separately, Bumble (BMBL 22.01, +4.38, +24.8%) and Rivian (RIVN 24.75, +4.16, +20.2%) are both rallying by at least 20% in response to their better-than-expected earnings reports. Beyond Meat (BYND 26.87, +0.72, +2.8%), which was down over 20% on disappointing earnings news, is now positive, aided by some short-covering activity.
