Inventories continue to decline, driven by technology
By Will Horner and Xie Yu
US stocks and global indices fell on Tuesday after concerns about rising inflation resurfaced, causing highflying tech stocks to sell off.
The S&P 500 fell 1% after the opening bell, a day after the broad market index fell 1% from its all-time high. The Nasdaq Composite fell 1.2%, extending its losses for the week to 3.7%. The Dow Jones Industrial Average fell about 350 points, or 1%.
Investors are betting that inflation is likely to rise sharply in the coming months, due to pent-up spending as well as supply bottlenecks and a surge in commodity prices. A sharp and sustained rise in inflation would erode returns on fixed income assets and stocks whose valuations are based on future earnings. Some fund managers are concerned that this may also prompt the Federal Reserve to cut back on its easy money policies sooner than expected.
“Inflation is an issue that is on everyone’s mind right now, and it injects a lot of uncertainty,” said Peter Langas, chief portfolio strategist at Bessemer Trust. “The question is, how is the Fed reacting to this?”
Tech companies are bearing the brunt of inflation problems this year. Growth stocks have led the strong market recovery since last spring. Investors are increasingly concerned that their high valuations may not be justified if inflation weakens the value of future earnings. This week, those concerns spilled over to other sectors as well, leading to a wider sell-off.
“When inflation is rising fast enough and there is nothing to contain it, that’s when stocks tend to perform poorly,” said Seema Shah, chief strategist at Principal Global Investors. “Over the past 10 to 20 years, inflation has not been a concern for investors and therefore, if you look at portfolios, they are not positioned for inflation risks.”
Market heavyweights Apple, parent company Google Alphabet and Facebook were among the tech stocks that fell on Tuesday, each falling about 1.6% or more. Other big tech companies were also under pressure: Tesla fell about 3%, while Twitter fell 1% and Snap fell 1.3%.
Cathie Wood’s ARK Innovation exchange-traded fund fell 1.6%, adding to a drop of more than 5% on Monday, as the fund’s holdings slid.
Novavax shares fell 20% after the company announced that it had delayed its plans to apply for regulatory clearance for its Covid-19 vaccine.
In bond markets, the yield on the 10-year US Treasury bill edged up to 1.621%, from 1.601% on Monday, marking its third consecutive trading day of gains. Yields increase as prices fall.
Comments on Tuesday from John Williams, chairman of the Federal Reserve Bank of New York, and Lael Brainard, a member of the Fed’s board of governors, could offer new insights into how they perceive inflationary pressures and changing market conditions. American interest rates. The Fed, under President Jerome Powell, has stressed that it will not be swayed by one-off price increases due to the economic reopening.
In commodities, Brent, the international energy benchmark, fell 1.6% to $ 67.23 per barrel.
Overseas, the pan-continental Stoxx Europe 600 index fell 2.3%.
In Hong Kong, the Hang Seng index fell 2%. Japan’s Nikkei 225 fell 3.1%, while South Korea’s Kospi index fell 1.2%.
Asian markets have followed US indices lower amid inflation concerns, said Grace Tam, senior investment advisor at BNP Paribas Wealth Management in Hong Kong. These concerns have been exacerbated by the tougher stance of Chinese regulators on its tech giants, she said. “The general sentiment towards Chinese technology companies has been weak.”
New data showed that factory gate prices in China jumped last month by the most in three and a half years, adding to concerns about the spread of inflationary pressures globally.
– Caitlin McCabe contributed to this article.
(END) Dow Jones News Wire
May 11, 2021 10:09 am ET (2:09 pm GMT)
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