Stocks fall in volatile trade after CPI

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  • U.S. stocks began selling again on Wednesday, led by a 3% drop in the Nasdaq.
  • Inflation in April rose to 8.3%, higher than the 8.1% estimated in a Bloomberg survey of economists.
  • Core consumer prices excluding food and energy rose 0.6%, above the forecast rate of 0.4%.

Shares fell on Wednesday and resumed a selloff after the April US inflation reading showed signs of price cooling, but not enough to convince the


Federal Reserve

to refrain from aggressive rate hikes.

The S&P 500 recorded its fourth loss in five sessions and the Nasdaq Composite fell more than 3%. The indices as well as the Dow Jones Industrial Average moved into positive territory but ultimately lost ground. On Tuesday, the S&P 500 and Nasdaq halted a three-day selloff.

Stocks fell in Wednesday’s session after the Bureau of Labor Statistics said the consumer price index rose 8.3% in the year to April. Economists polled by Bloomberg expected the inflation gauge to rise 8.1%. The reading was slower than the 8.5% rate in March that marked a 41-year high.

Core inflation for April, which excludes volatility in food and energy prices, rose 0.6% month-on-month, above the consensus estimate for 0.4%. An airfare index climbed nearly 19%, the largest one-month increase since this series began in 1963, the BLS said.

“Thus, with an elevation


volatility

and significant market declines, along with slowing economic growth and growing concerns about a possible


recession

the question facing the Fed (and investors) is how far the central bank will be willing to go to control inflation, which is more rigid and more structural (including higher wages )? Rick Rieder, chief investment officer of global fixed income at BlackRock, the world’s largest asset manager, wrote in a note.

Here’s where the U.S. indices stood at 4:00 p.m. Wednesday:

“Achieving policy neutrality is unquestionably necessary, but the Fed would do well to pause and take stock of the impact of its policies at this point, as the unintended consequences of over-tightening would be best avoided,” Rieder wrote.

The Fed has raised interest rates by 75 basis points since March to a range of 0.75% to 1% in a bid to combat high inflation. Stocks have largely fallen this year as investors fear that larger Fed rate hikes, which are rapidly driving up borrowing costs, could push the world’s largest economy into a recession.

Around the markets, Bank of America says small-cap stocks have mostly been priced in a recession and are the cheapest in 11 years, while the big names are set for more downside to come.

Coinbase fell after the stock and crypto trading platform missed analyst estimates with its first quarter results.

Algorithmic stablecoin TerraUSD slid as low as $0.30 as traders warned of a “death spiral” in an asset designed to be pegged to the dollar.

Oil prices jumped. West Texas Intermediate crude rose 5.6% to $105.33 a barrel. Brent, the international benchmark, gained 4.5% to $107.04.

Gold rose 0.6% to $1,851.90 an ounce. The 10-year yield fell 8 basis points to 2.92%.

Bitcoin fell 3.7% to $29,822.36.

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