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Stocks Fall and Nasdaq Sinks 2.6% on Renewed Inflation Worries

The Nasdaq falls sharply as surging commodity prices renew concerns about rising inflation.

Stocks finished lower Monday and the tech-heavy Nasdaq tumbled 2.55% on renewed anxiety over the prospects of higher inflation.

The Dow fell 34 points, or 0.1%, to 34,742, after establishing an all-time intraday high during the session. The S&P 500 dropped 1.04%. The Nasdaq sank as surging commodity prices had traders again concerned about rising inflation. Copper prices traded at record highs and iron ore futures surged.

Alphabet  (GOOGL) - Get Alphabet Inc. Report and Facebook  (FB) - Get Meta Platforms Inc. Report shares fell Monday after Citigroup analyst Jason Bazinet downgraded the tech titans to neutral from buy. Tesla  (TSLA) - Get Tesla Inc. Report dropped 6.44%.

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Oil prices fell slightly as Colonial Pipeline, the operator of a major pipeline system that transports fuel across the East Coast, shut down operations because of a ransomware attack.

The company said Monday it aims to “substantially” restore services by the end of the week.

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“While this situation remains fluid and continues to evolve, the Colonial operations team is executing a plan that involves an incremental process that will facilitate a return to service in a phased approach,” Colonial said. “This plan is based on a number of factors with safety and compliance driving our operational decisions, and the goal of substantially restoring operational service by the end of the week.”

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Tech shares led markets higher Friday after the U.S. added only 266,000 jobs in April, well below forecasts that called for close to 1 million. Investors believe the Federal Reserve will remain accommodative for longer following the weak jobs number.

With the first-quarter earnings season drawing to a close, and the lull of the summer months just a few weeks away, Wall Street will be bracing for the typical headwinds stock markets face between May and October.

But many analysts believe the coming months might be atypical as the U.S. recovers from the worst of the coronavirus pandemic and the Fed continues with its full-throated economic support.

"Record highs in U.S. stocks are not a barrier to further stock gains thanks to low interest rates, a supportive Federal Reserve, and strong corporate earnings," said Andrea Bevis, senior vice president of UBS Private Wealth Management.

About 88% of the companies in the S&P 500 have reported their first-quarter earnings. The blended earnings growth rate is at 49.4%, up from 24.5% at the start of earnings season, according to FactSet. In addition, 86% of companies have topped analysts' expectations, above the 77% one-year average and a record high.