The Dow erased earlier gains to end lower, the Nasdaq dipped 2.6%, and the S&P 500 also finished lower
Stocks fell on Monday, with technology stocks under more pressure as investors weighed the risks that higher inflation during the pandemic recovery might drag on high-growth names.
The Dow erased earlier gains to end lower, after the index set an intraday record of more than 35,000 during the session. The Nasdaq dipped 2.6% for its worst day since March, and the S&P 500 also finished lower.
Treasury yields were slightly higher across the long end of the curve, with the benchmark 10-year yield hovering below 1.6%. West Texas Intermediate (WTI) crude oil prices and gasoline futures advanced after the Colonial Pipeline, a top U.S. fuel pipeline operator, temporarily cut off its fuel lines after a cyberattack.
Elsewhere, Ether, the token built on the Ethereum blockchain, set an all-time high of more than $4,000 before paring advances, giving back some gains after a rally that doubled prices for the second-largest cryptocurrency since the beginning of April. Bitcoin prices dropped, dipping below $56,000.
Investors have been focused on the prospects of inflation during the economic recovery coming out of the pandemic, with a surge in demand during reopenings apt to drive a surge in prices.
Friday’s sharply disappointing jobs report at least temporarily assuaged traders’ concerns, with the miss viewed as adding fuel to policymakers’ assertions that a full economic recovery remains a ways off.
The U.S. Bureau of Labor Statistics’ April consumer price index (CPI) due out Wednesday and producer price index (PPI) on Thursday will show the latest change in prices for consumers and suppliers, with both indexes expected to show a marked rise over last year’s pandemic-depressed levels as demand resurges during the recovery.
Before the pandemic, monthly CPI releases tended to pass without much comment. Now they will be scoured for any evidence of a post-pandemic jump in inflation, Neal Shearing, group chief economist for Capital Economics, wrote in a note Monday. He said investors should watch for three main themes in these reports and in other near-term data.
The first is evidence of what might be termed ‘opening up’ inflation. This is likely to appear in goods and services for which there is a surge in demand as restrictions are lifted such as hotels, restaurants, airfares and clothing, he said. The extent of pent-up demand in these areas means that, even in the best of times, supply might struggle to keep pace.
The second is evidence of ‘opening up’ disinflation, he added. Some goods, including IT equipment and groceries, saw sharp increases in demand and prices as people were forced to stay at home. It follows that these components should see the reverse of reopening inflation.