Stocks Fall Further After Surprising CPI Data
Stocks continued to slide as the morning waned. All major indices are suffering after the inflationary
Consumer Price Index
rocked bonds and raised fears of higher inflation.
Shares of Baby Bell
U S West
(USW)
rose today after
CNBC
reported that the phone company is in talks to be aquired by
Global Crossing
(GBLX)
, a provider of undersea fiber-optic telecommunications systems. Shares of U S West were lately up 1 5/16 to 61 5/16, while Global Crossing fell by 7/16 to 59 3/4.
The
Dow Jones Industrial Average
rebounded from the day's lows, but the average lately was off 166 to 10,941, a 2% decline. Hit hardest were the financial stocks, including
Citigroup
TheStreet Recommends
(C) - Get Citigroup Inc. Report
, down 2 15/16 to 70 1/2, and J.P. Morgan
(JPM) - Get JP Morgan Chase & Co. Report
, down 5 to 141 3/4.
This morning the CPI gained an unexpected 0.7%, well above the 0.4% that economists were expecting. The core, which excludes food and energy prices, rose 0.4%, versus the market's expectations for a 0.2% gain. The shock caused traders to sell rapidly, and lately bonds are extending those losses. The 30-year Treasury bond was down 2 15/32 to 90 15/32. The yield rose to 5.94%, its highest in almost a year.
The rise in yields is bad for stocks because it means companies' cost of capital increases. It also causes analysts to re-examine current valuations of equities. The rise in bond yields makes the Treasury bond, a guaranteed investment, more attractive when viewed against riskier equities.
The
S&P 500
was lately down 25 to 1342. The
Nasdaq Composite Index
was also getting hammered, down 34 to 2548.
On the New York Stock Exchange, decliners were beating advancers by a count of 2,287 to 563 on 342 million shares. Losers were ahead of winners on the Nasdaq as well by a count of 2,324 to 1,216 on 422 million shares.
TheStreet.com Internet Sector
index was off modestly, down 12 to 630, while the small-cap
Russell 2000
was down just 7 to 444.
Tech Focus
All major tech indices were feeling the pain as a result of the heightened worries over inflation. The
Morgan Stanley High-Tech 35
fell 16 points to 1039. The
Philadelphia Stock Exchange Semiconductor Index
was down 5 to 402 and the
Philadelphia Stock Exchange Box Maker Index
declined by 5 to 248.
Oracle
(ORCL) - Get Oracle Corporation Report
is once again the most active stock on the Nasdaq, with 22 million shares having traded hands. The stock is staging a recovery today, up 1 5/16 to 24 5/16.
Iridium
(IRID)
, which runs the first global satellite-telephone network, was down 3 11/16 to 10 11/16 after the company said it doesn't expect to meet the terms of an $800 million debt by the May 31 deadline. The company's junk bonds were trading in the teens as of last week.
10:59 a.m.: Stocks Continue to Take a Beating Amid Bond Meltdown
With bonds at their lowest levels in a year, stocks remain under heavy pressure.
The problem is the April
Consumer Price Index
, which came in well above expectations and may force the
Federal Open Market Committee
to shift toward a tightening bias at its meeting next Tuesday.
"People are getting spooked again about inflation," said Jim Volk, co-director of institutional trading at
D.A. Davidson
in Portland, Ore. "We'll see what happens, but right now the line of least resistance is down."
The
Dow Jones Industrial Average
was lately off 147, or 1%, to 10,960. The
S&P 500
was down 23, or 2%, to 1345.
Tech stocks and Internets were taking heavy hits. The
Nasdaq Composite
was down 30, or 1% to 2552, and
TheStreet.com Internet Sector Index
was down 9 to 633. Small-caps, which have seen good gains over the last month, were down as well: The
Russell 2000
lost 5, or 1%, to 446.
The 30-year bond was last down 2 2/32 to 90 29/32, yielding 5.90%
There was selective strength in oils and cyclicals, as investors bet that growth in those sectors would be able outpace a hike in rates.
--
Justin Lahart
9:58 a.m.: Surprise in CPI Data Sends Stocks Tumbling
Stocks and bonds are plunging in early trading after a surprisingly large increase in the
Consumer Price Index
.
The April CPI rose 0.7% overall and 0.4% excluding volatile food and energy prices -- both figures were way ahead of expectations. The 30-year Treasury bond lurched sharply downward as soon as the numbers came out at 8:30 a.m. EDT, and it lately was down 1 23/32 to 91 8/32. The yield shot up to 5.88%, the highest level in nearly a year.
The
Dow Jones Industrial Average
was down 105 to 11,002, the
S&P 500
was down 18 to 1350, the
Nasdaq Composite Index
was down 46 to 2536, the
Russell 2000
was down 6 to 445 and
TheStreet.com Internet Sector
index was down 14 to 628.
Most Up at Open -- NYSE
Case (CSE) , up 1 11/16 to 44 1/2
: Case was rising on news of a possible merger with
New Holland
(NH) - Get NantHealth Inc. Report
.
Most Up at Open -- Nasdaq
@Home (ATHM) - Get Autohome Inc. American Depositary Shares each representing four class A. Report, up 2 3/4 to 152 1/16
: The company formed an alliance with
Microsoft
(MSFT) - Get Microsoft Corporation Report
to speed the launch of high-speed Web services.
Most Down at Open -- NYSE
Charles Schwab (SCH) , down 5 15/16 to 111 1/16
.
Most Down at Open -- Nasdaq
Net.B@nk (NTBK) , down 6 1/8 to 181 1/8
.
--
John J. Edwards III
