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US STOCKS-Wall St drops as strong inflation data fuels rate hike bets

Published 05/12/2021, 10:15 PM
Updated 05/12/2021, 10:20 PM
© Reuters.
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(For a Reuters live blog on U.S., UK and European stock
markets, click LIVE/ or type LIVE/ in a news window.)
* U.S. consumer prices jump more than expected in April
* Electronic Arts gains on upbeat revenue forecast
* Indexes down: Dow 0.57%, S&P 0.74%, Nasdaq 1.16%

(Adds comment, details; updates prices)
By Medha Singh and Sruthi Shankar
May 12 (Reuters) - Wall Street's major averages fell on
Wednesday after stronger-than-expected inflation data stoked
fears of tighter monetary policy to combat a possibly longer
period of inflation.
The Labor Department's data showed U.S. consumer prices
increased by the most in nearly 12 years in April as booming
demand amid a reopening economy pushed against supply
constraints. Excluding the volatile food and energy components,
it soared 0.9%, the largest gain since April 1982. U.S. money markets moved fully to price in a 25 basis point
interest rate hike by December 2022 after the data. "There is uncertainty over how long inflation is going to
exist within the current economic recovery because we can see
increases in housing prices, commodities around the world and
increase in demand for goods and services," Brian Vendig,
president, MJP Wealth Advisors in Westport, Connecticut.
"The uncertainty over the path of rates and inflation is
making investors reconsider their portfolios, especially in
technology stocks and others that had done really well last
year."
Rising commodity prices and signs of labor shortage have
fueled worries over rising prices, triggering a selloff that
sent the S&P 500 nearly 3% below its record closing high on
Friday, even as the Fed reassured that any price pressure would
be transient.
At 9:57 a.m. ET, the Dow Jones Industrial Average .DJI
was down 195.17 points, or 0.57%, at 34,073.99, the S&P 500
.SPX was down 30.58 points, or 0.74%, at 4,121.52. The Nasdaq
Composite .IXIC was down 155.20 points, or 1.16%, at
13,234.23.
Bank stocks .SPXBK , which tend to outperform in a rising
interest rate environment, gained 1.1%. The energy sector
.SPNY also added 1.4% as oil prices firmed about 1%. O/R
Nine of the 11 major S&P sectors were lower with technology
.SPLRCI , consumer discretionary .SPLRCD and communication
services .SPLRCL leading losses.
Among mega-caps, Facebook Inc FB.O , Amazon.com Inc
AMZN.O , Apple AAPL.O , Google-parent Alphabet Inc GOOGL.O
and Microsoft Corp MSFT.O fell between 0.6% and 1.2% as
investors pulled out of the names on worries that higher U.S.
rates could weigh on their lofty valuations.
Electronic Arts Inc EA.O rose 1.9% as it forecast annual
adjusted revenue above market expectation, betting that demand
for its titles like "FIFA 21" and "Apex Legends" would stay
strong. Bumble Inc BMBL.O slipped 1% ahead of its first-quarter
results due after market close.
Declining issues outnumbered advancers for a 2.66-to-1 ratio
on the NYSE and for a 1.93-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and no new
low, while the Nasdaq recorded 19 new highs and 35 new lows.

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