Tech sector leads stocks lower as inflation stays high
Stocks fell on Wall Street on 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% 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%, and the Nasdaq fell 3.2% 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 high inflation last longer than it expected.
Wednesday’s report from the U.S. Labor Department showed inflation slowed a touch in April, down to 8.3% from 8.5% in March. Investors also found some glass-half-full signals in the data that inflation might be set to ease further.
Nevertheless, the numbers were still higher than economists forecast. They also showed a bigger increase than expected in prices outside food and gasoline, something that economists call “core inflation” and can be more predictive of future trends.
“Core inflation came in hot, and that’s what really matters to the Fed at this point,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.
Economists said the inflation report will keep the Fed on track for rapid and potentially sharp increases in interest rates in upcoming months.
The S&P 500 fell 65.87 points to 3,935.18, while the Nasdaq slid 373.44 to 11,364.24. Both indexes posted five straight weekly losses heading into this week.
The Dow dropped 326.63 to 31,834.11. The blue-chip index has racked up six straight weekly losses.
The Russell 2000 of smaller companies fell 43.65 (2.5%) to 1,718.14.