Stocks Tumble, Bond Yields Surge on Inflation Angst
3:28 pm Friday, June 10th, 2022
US stocks tumbled and Treasury yields spiked higher after an unexpectedly hot reading in consumer prices fueled bets the Federal Reserve will have to step up its battle against inflation.
The report showed that CPI increased 1.0% month-over-month, lifting the yr/yr rate (8.6%) past the peak from March. Core CPI was also hotter than expected on a month-over-month basis, increasing 0.6%, but the yr/yr rate slowed to 6.0% from 6.2% in April and 6.5% in March.
Even with the slight deceleration in the yr/yr core rate, the report made for an all-around disappointment, showing broad-based increases across different categories. Adding insult to injury, the preliminary reading of the University of Michigan Consumer Sentiment survey for June slid past its record low from 1980 (52.7), hitting a fresh record low of 50.2.
All eleven sectors display midday losses with nine groups down at least 1.0%. Top-weighted sectors like consumer discretionary (-4.3%), technology (-3.6%), and financials (-3.6%) sit at the bottom of today’s leaderboard while consumer staples (-0.4%) and utilities (-0.6%) display the slimmest losses.
The discretionary sector is the worst performer amid concerns about inflation weighing on consumer spending. Every component of the sector trades in the red with Etsy (ETSY) and Booking Holdings (BKNG) sitting at the bottom of the barrel. Amazon (AMZN) is falling for the fourth consecutive day toward its May low (101.26) while the SPDR S&P Retail ETF (XRT) has dropped to its lowest level in over two weeks.
Concerns about the strength of the consumer have also been reflected in underperformance among credit providers. Discover Financial (DFS) and Synchrony Financial (SYF) are the biggest laggards among financials.
The top-weighted technology sector is also suffering from broad-based weakness and pressure from underperformance in some of its largest components like Adobe (ADBE) and NVIDIA (NVDA). Apple (AAPL), meanwhile, trades a step ahead of the sector.
Even energy (-2.4%) has been confined to negative territory, causing the sector to turn negative for the week (-1.7%). Crude oil is down $2.12, or 1.7%, at $119.39/bbl, backpedaling from a three-month high that was set on Wednesday.
Treasuries have been sliding throughout the day with the 2-yr note pacing the selling. As a result, the 2-yr yield has climbed above the 3.00% mark (+21 bps) while the 10-yr yield is up 13 bps at 3.17%, rising past its May high.
