US stocks fell on Wednesday, causing technology stocks to move lower as key inflation data showed higher than expected price pressures.
The Dow Jones Industrial Average fell 330 points on Tuesday after its worst day since February. The S&P 500 lost 1.3% while the tech-heavy Nasdaq Composite was down 2%.
Selling strengthened after the S&P 500 fell below Tuesday’s lows. A level trader was watching this closely due to the intraday rebound a day ago. As soon as the S&P fell below that low about an hour after it started trading, the benchmark fell even further.
Inflation accelerated last month, at its fastest level since 2008, with the consumer price index up 4.2% yoy, compared with the Dow Jones estimate for a 3.6% increase. The monthly profit was 0.8% versus the expected 0.2%.
Excluding volatile food and energy prices, the core CPI rose 3% over the same period in 2020 and 0.9% monthly. The respective estimates were 2.3% and 0.3%.
“The markets are at all their highs, and much of the reopened trading has already been priced in. So there is no question that the oversized inflation rate could bring us back down a little,” said Mike Loewengart, managing director of investment strategy at E -Trade.
“Remember that the Fed has made it clear that inflation hikes will not necessarily deviate from its simple monetary policy, and that further jumps like this could be temporary. So is this a trend? That remains to be seen,” Loewengart said.
Tech stocks that have been under pressure this week and month saw another decline on Wednesday. Alphabet, Microsoft, Facebook, Amazon, and Apple’s shares all fell more than 2%, while chipmakers Nvidia and AMD’s shares were also lower. Tesla slipped 3%.
The strength of bank stocks and energy stocks, which could do well in an inflationary environment, helped support the broader market. JPMorgan was up 1% while Occidental Petroleum was up 6.5%. Chevron was also trading 2% higher.
The tech sector saw a major reversal during the previous session, with the Nasdaq Composite taking a loss north of 2% and ending the day flat. However, the blue chip Dow lost more than 450 points. The S&P 500 was down 0.9% but avoided its second consecutive 1% loss.
The Technology Select Sector SPDR is down nearly 2% this week and 5% this month as investors re-evaluate the group’s high valuations amid rising inflation.
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