Tech weighs heavy after inflation report
Early rally fades late, wiping out daily gains from Tuesday
Stocks fell on Wall Street Wednesday, led by more drops in technology companies, after a report on inflation came in worse than feared.
An early rally faded, leaving the S&P 500 1.6 percent lower after waffling between gains and losses in morning trading. The slide wiped out gains from a day before, when the benchmark index snapped a three-day losing streak.
The Dow Jones Industrial Average dropped 1 percent and the Nasdaq fell 3.2 percent as tech stocks weighed down the broader market. The three major indexes are each on pace for another sharp weekly loss.
Wall Street has been transfixed on the nation’s high inflation, and where it’s heading, because it’s causing the Federal Reserve to yank the supports it propped under markets for most of the pandemic. The Fed has flipped aggressively toward raising interest rates after seeing
Wednesday’s report also underscored the challenges for the Federal Reserve and White House in their struggles to tame inflation.
In April, a fallback in gas prices helped slow overall inflation. Nationally, average prices for a gallon of gas fell to as low as $4.10 in April, according to AAA, after having spiked to $4.32 in March. But since then, gas prices have surged to a record $4.40 a gallon.
Grocery prices, too, are still soaring, in part because Russia’s invasion of Ukraine has heightened the cost of wheat and other grains. Food prices rose 1 percent from March to April and nearly 11 percent from a year ago. That year-over-year increase is the biggest since 1980.
Such rapid inflation has led many Americans to cut back on spending. Among them is Patty Blackmon, who said she’s been driving to fewer of her grandchildren’s sports events since gas spiked to $5.89 in Las Vegas, where she lives.
To save money, Blackmon, 68, also hasn’t visited her hairdresser in 18 months. And she’s reconsidering her plan to drive this summer to visit relatives in Arkansas. She was shocked recently, she said, to see a half-gallon of organic milk reach $6.
“Holy cow!” she thought. “How do parents give their kids milk?”
Blackmon has cut back on meat, and “a steak is almost out of the question,” she said. Instead, she is eating more salads and canned soups.
Likewise, David Irby of Halifax, Va., said he’s been cutting back on food and other highercost expenses. A veteran who retired on disability in 2015, Irby, 57, said he has switched to chicken from beef and quit buying bacon or junk food, like his favorite treat, Cheetos.
Irby’s biggest worry? Replacing his 22-year-old Ford truck, which is no longer reliable on long trips. A new one costs $50,000. Even a 5-year old used version is about $40,000.
“I don’t know how people on a fixed income can buy a vehicle now,” he said. “It takes me almost two years to make $40,000.”
Turmoil overseas could potentially accelerate inflation in the coming months. If the European Union decides to bar imports of Russian oil, world oil prices could rise. So could U.S. gas prices. And China’s COVID lockdowns could worsen supply chain snarls.
In April, airfares soared a record 18.6 percent, the largest monthly increase since recordkeeping began in 1963. And hotel prices jumped 1.7 percent from March to April.
Southwest Airlines said last month that it foresees much higher revenue and profits this year as Americans flood airports after having postponed travel for two years. Southwest said its average fare soared 32 percent in the first three months of the year from the same period last year.
There are signs, though, that supply chains are improving for some goods. Wednesday’s report showed that prices for appliances and clothing both fell 0.8 percent, while the cost of used cars dropped 0.4 percent, the third straight decline. Used cars and other goods drove much of the initial inflation spike last year as Americans stepped up spending after vaccines became widespread.