Stocks Wobble as Inflation Weighs on Markets

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Cryptocurrencies fall broadly, with bitcoin hitting its lowest level since 2020

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Stocks have come under pressure due to concerns about the Fed’s pullback of easy monetary policies as it combats the recent bout of high inflation. Consumer prices rose in April at a slower pace than the previous month, but still faster than economists had expected, data released Wednesday showed.

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That fueled more worries that the central bank will raise interest rates at an aggressive pace and crush growth, weighing on markets that had grown accustomed to loose monetary policy. Tech stocks, especially, flourished in the ultra-low interest rate era and have tumbled sharply, with the Nasdaq Composite trading at its lowest level since November 2020.

“Markets fear that central banks, by trying to tame inflation, might trigger a recession or at least a sharp economic downturn. When you look at the CPI data yesterday, maybe it’s a little bit too early to call the peak of inflation,” said Luc Filip, head of investments at SYZ Private Banking.

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The yield on the benchmark 10-year Treasury note declined to 2.859% from 2.918% on Wednesday, edging down for a fourth consecutive trading session. Bond yields and prices move in opposite directions.

The recent declines in Treasury yields signal that the relationship between bonds and stocks could be improving. Earlier in the year, stocks and bonds fell in tandem at a pace not seen in decades.

“It’s possible the correlation between bonds and equities from here on goes back to being negative and that’s one of the elements needed to stabilize the markets,” said Olivier Sarfati, head of equities at GenTrust.

The producer-price index, another inflation metric, rose by an annual rate of 11% in April. That marked a decline from the previous month, but still ahead of the predictions of economists. Weekly jobless claims came in at 203,000, nearly unchanged from the previous week.

“Markets, on the margin, have shifted their probability toward a hard landing and toward further tightening from the Fed,” said Karim Chedid, an investment strategist at BlackRock. The decline in longer-dated bond yields suggests that growth expectations have fallen, he said.

The dollar strengthened, with the ICE US Dollar Index rising 0.6% to the highest level since 2002. The index measures the greenback against a basket of other currencies.

Cryptocurrencies continued to drop, with bitcoin falling as low as $25,402.04 Thursday, its lowest level since December 2020, before rebounding to about $28,600, according to CoinDesk. It has lost about 60% of its value since its peak last November. Ether declined 4.8% from Wednesday to trade around $1,933.85.

In corporate news, Beyond Meat ticked up 7.1% after the meat-alternative company reported a wider-than-expected loss in the last quarter due to higher spending. Coinbase gained 4.8%, after losing more than a quarter of its value on Wednesday.

Shares of WeWork added 11% after reporting a narrower loss and raising its guidance. Walt Disney declined 0.6% after the company reported higher operating losses and said it may not maintain its current growth rate in streaming subscribers.

Oil prices gained after US crude inventories rose more than expected. Global benchmark Brent crude added 0.7% to $108.25 a barrel. Prices were also weighed down by slow progress on European Union negotiations to potentially ban Russian crude imports, according to analysts at ANZ.

Overseas, the pan-continental Stoxx Europe 600 fell 0.3%.

A benchmark for Western European natural-gas prices rose 12% after Russia sanctioned several European gas supply chain companies on Wednesday evening, increasing risks of disruptions.

In Asia, most major benchmarks declined. Hong Kong’s Hang Seng Index dropped 2.2%, and Japan’s Nikkei 225 fell 1.8%.

Write to Anna Hirtenstein at [email protected]


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