U.S. stocks slumped lower Wednesday, and look poised to give back all of yesterday's gains, as a surge in global energy prices adds to inflation concerns that could stall the post-pandemic recovery.
Stocks were given some support, however, by a stronger-than-expected reading of private sector jobs gains for the month of September, with ADP reporting the addition of 568,000 new positions last month.
With oil prices trading at the highest levels in seven years, thanks in part to price spikes in coal and natural gas that has accelerated energy switching in major economies around the world, benchmark government bond yields are moving north in response to the anticipated inflation effects of the rolling energy crunch.
In the UK, where the nation's power grid relies heavily on natural gas imports, prices surged by 37% on Wednesday alone to a fresh record high of more than $40 per British Thermal Units, a level that is around eight times higher than spot prices in the United States and the equivalent of around $220 for a barrel of crude oil.
Benchmark 10-year Treasury notes yields jumped to 1.552% in overnight trading, before easing to 1.511%, with investors now concerned for both the energy-related impact on inflation and the slowing growth prospects of power shortages around the world.
At the same time, the Atlanta Federal Reserve's GDPNow forecasting tool, a real-time indicator of U.S. growth, fell to 1.3% in its last reading, with consumption pegged at just 1.1%.
"The beat on private payroll numbers is a positive but there’s no shortage of catalysts out there that could move the market; surging energy prices, debt ceiling impasse, and booster uncertainty," said Mike Loewengart , managing director of investment strategy at E*Trade Financial. "And positive labor market data comes with the implication that the Fed can tighten policy at a quicker pace. But the fact that hiring is up, shouldn’t be discounted—it’s definitely a good thing in terms of recovery."
The Dow Jones Industrial Average slumped 355 points by mid-dat trading while the broader S&P 500 fell 35 points.
Facebook (FB) - Get Free Report shares also extended their recent decline, falling 2% to $326.50 each even as CEO Mark Zuckerberg addressed both accusations from a whistleblower that the social media giant prioritizes profits over people, as well as a crippling error that shut down its platforms for six hours earlier this week, in a rare public post late Wednesday.
Constellation Brands (STZ) - Get Free Report shares fell 0.4% higher after the Corona and Modelo beer maker posted weaker-than-expected second quarter earnings, but topped Street revenue forecasts and boosted its full-year profit outlook.
WTI futures for November delivery were last seen $1.37 lower on the session at $77.56 per barrel while Brent contracts for December, the global pricing benchmark, slipped $1.36 to $81.19 per barrel, near the highest since 2014.
Natural gas prices are on the move, as well, surging nearly 40% in a single day in the United Kingdom and rising nearly 1.5% in the U.S. to $6.40 per British Thermal Units.
In overseas markets, energy price surges in Europe, as well as a disappointing reading for Germany's August exports, clipped the region-wide Stoxx 600, which fell 1.9% in late-morning trading in Frankfurt.
Overnight in Asia, where markets in China remain closed for the Golden Week holiday celebrations, Japan's Nikkei 225 slumped 1.05% to close at a six-week low of 27,528.87 points while the region-wide MSCI ex-Japan benchmark fell 0.94% to test the lowest levels in nearly a year.