U.S. inflation data hits global stocks, lifts benchmark yields
Major global stock indexes fell on Thursday under pressure from crucial U.S. inflation data, falling technology shares and rising benchmark bond yields.
U.S. consumer prices rose solidly in January, leading to the biggest annual increase in inflation in 40 years, which could fuel financial market speculation for a 50 basis points interest rate hike from the Federal Reserve next month.
Wall Street retreated. The Dow Jones Industrial Average fell 505.34 points, or 1.41 percent, to 35,262.72, the S&P 500 lost 75.93 points, or 1.66 percent, to 4,511.25 and the Nasdaq Composite dropped 250.30 points, or 1.73 percent, to 14,240.07 by 2:16 p.m. EST (1916 GMT).
Tech stocks, which boosted U.S. shares to steep gains earlier in the week, were down 2.4%. Microsoft Corp was down nearly 3%, Amazon.com Inc slid 1.6% and Apple Inc fell 1.9%.
The MSCI world equity index fell 0.9% after clinging to gains throughout much of the session.
The pan-European STOXX 600 index closed down 0.2% as rising bond yields. The heavyweight technology sector fell more than 1%, with losses in France’s Atos a drag.
Meanwhile, the FTSE 100 rose 0.38% and the German DAX edged up 0.05%.
“While inflation continued to overshoot the Fed’s target in January, fundamental drivers of inflation are starting to improve,” said Bill Adams, chief economist for Comerica Bank. “Remember, a big part of the surge in prices was from shortages, and the economy is making big strides to reduce shortages.”
A pullback in government bond yields in recent days and a tech-fueled rebound had supported the broader stock market rally this week. But most markets remain down sharply for the year - the tech-dominated Nasdaq 100 by 8% - after a January in which investors panicked about the impact of higher rates and less cheap money on highly valued shares.
The Fed is broadly expected to begin raising rates at its March meeting.
Federal funds rate futures have increased the chances of a half percentage-point tightening by the Federal Reserve at next month’s meeting following the U.S. consumer prices report.
In Asia, Chinese blue chips lost 0.26% as investors took profits and worries about U.S. sanctions continued to weigh on sentiment.
Japan’s blue-chip Nikkei closed 0.42% higher.
Long-term bond yields had been continuing Wednesday’s retreat when U.S. inflation data sent them whipsawing. The yield on the benchmark 10-year U.S. Treasury note topped 2% for the first time since August 2019. [US/]
Germany’s benchmark 10-year yield soared to its highest since December 2018.