Stocks Retreat After Inflation Data
US stocks slid Friday and bond yields rose, as investors continued to assess how the Federal Reserve might react to the latest strong inflation report.
The S&P 500 recently lost 1.6%, a day after the broad index fell 1.8%. The Nasdaq Composite fell 2.2%. The Dow Jones Industrial Average erased about 436 points, or 1.2%.
All three indexes were on pace to post losses for the week.
Markets have traded choppily this week, as investors have digested shifting expectations about the prospective pace of central banks’ monetary tightening. Data on Thursday showed that inflation hit 7.5% in January, a four-decade high. A Federal Reserve official said the central bank might have to move more drastically to curtail consumer prices, spooking investors.
Those events injected fresh volatility into a stock market that is still on fragile footing. They also sent the yield on the benchmark 1[ads1]0-year Treasury note above 2% for the first time since mid-2019. The yield, which settled Thursday at 2,028%, recently traded at 1,987%. Yields and bond prices move inversely.
“The move is coming as the number of expected rate hikes this year rises. We’re in a process where the Fed is catching up to the market, ”said Sebastien Galy, a macro strategist at Nordea Asset Management.
Before Thursday’s downturn, the US stock market seemed to show signs of stabilizing. The S&P 500 had risen in seven out of the last nine sessions going into Thursday. But concerns that the Fed may more aggressively hike interest rates this year frazzled investors again.
Early Friday, it seemed that stocks might recover. All three major US indexes opened higher. But stocks turned lower as the session continued. Only four sectors in the S&P 500 — financials, energy, utilities and consumer staples — recently traded higher.
“Inflation is currently in the public eye. It has become a political question, ”said Florian Ielpo, head of macro at Lombard Odier Investment Managers. “This is something that is concerning us, we have a rising risk of monetary policy mistakes. This is the number one risk we see in 2022. ”
In individual trading, Zillow rose 17% after it reported a jump in revenue for its core unit, despite losing $ 881 million on its closed home-flipping business last year. Fintech company Affirm tumbled 16% after its sales forecast came in below Wall Street’s expectations. It plunged 21% Thursday.
Apollo Global Management dropped 3.2% Friday after it reported a lower profit. The Wall Street Journal reported that the private-equity firm was nearing a deal to buy Worldline‘s
point-of-sale terminal business.
Some think rising inflation means companies are forced to raise their prices. But as WSJ’s Dion Rabouin explains, it actually works the other way around: Corporations actually drive inflation, and data show that they have been and will continue to push prices up for some time. Illustration: Elizabeth Smelov
Overseas, the pan-continental Stoxx Europe 600 slipped 0.6%.
In Asia, the Shanghai Composite Index fell 0.7%, while Hong Kong’s Hang Seng Index ticked down 0.1%. Markets in Japan were closed for a public holiday.
Traders worked on the floor of the New York Stock Exchange on Thursday.
Photo:
David L. Nemec / Associated Press
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Caitlin McCabe at caitlin.mccabe@wsj.com
Corrections & Amplifications
The yield on the benchmark 10-year Treasury note climbed to 2,036%, before easing to 1,996%. An earlier version of this article incorrectly said the yield rose to the highest intraday level since August 2019. (Corrected on Feb. 11.)
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