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April Core Inflation Rises At Fastest Pace Since 1981; Dow Futures Tumble

Core inflation rose at the fastest pace since 1981, while headline CPI posted its fastest increase since 2009, BLS data indicated Wednesday.

U.S. consumer price inflation increased at the fastest pace in more than a decade last month, data from the Bureau of Labor Statistics indicated Wednesday, as energy and used car gains boosted the headline reading amid an ongoing debate over the nature of price increases.

Headline CPI for the month of April was estimated to have risen 4.2% from last year, and 0.8% when compared to the March reading. So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.9% on the month -- the biggest gain since 1981 --and 3% on the year, the report noted.

Federal Reserve Vice Chairman Richard Clarida repeated the central bank's view Wednesday that price increases would be "transitory", noting in prepared remarks for the NABE International Symposium in Washington that he expects "inflation to return -- or perhaps run somewhat above -- our 2% longer-run goal in 2022 and 2023."

Inflation concerns have gripped global markets for much of the past few weeks, sending stocks into their longest losing streak in two months and pulling the Dow Jones Industrial Average to its biggest single-day decline since February on Tuesday.

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The so-called breakeven rate between five-year Treasury bonds and five-year inflation protected securities, a key market gauge for consumer price increases, was marked at 2.712% this week, the highest since 2006 and firmly ahead of the Fed's 2% inflation target.

Wage pressures are beginning to mount in the labor market, with JOLTS job openings data indicating 8.1 million open positions, the highest on record, while last week's April non-farm payrolls reported showed average hourly earnings rise 0.7% on the month -- against a forecast of -0.1% -- and 0.3% on the year. 

Benchmark 10-year Treasury bond yields rose to 3 basis points 1.654% following release of the data, ahead of a $41 billion auction of new paper later this morning, while U.S. equity futures extended their pre-market slump, with contracts tied to the Dow Jones Industrial Average indicting a 125 point opening bell decline.

Contracts tied to the S&P 500 are indicating a 30 point dip while those linked to the tech-focused Nasdaq  looking at a 190 point decline.