The inflation dragon that many thought had been slain is coming back to haunt Wall Street, which is struggling with a new scenario of higher oil prices, rising interest rates and political uncertainty.
The blue-chip Dow Jones Industrial Average fell 1.03 percent to 10,012.87 during the week ending Friday while the broad-market Standard & Poor's 500 index dipped 0.28 percent to 1,095.70.
The technology-heavy NASDAQ composite shed by 0.71 percent for the week to 1,904.25.
A record high in crude oil prices has roiled investors already fearing a resurgence of inflation, which showed signs of returning to the forefront over the past week at the wholesale and consumer level.
The government said consumer prices rose a modest 0.2 percent in April with core prices, stripping out energy and food, up 0.3 percent.
More worrying, core prices were up 1.8 percent in April compared to last year, following year-on increases of 1.2 percent in February and 1.6 percent in March.
Meanwhile wholesale prices were up 0.7 percent, the biggest rise since March last year, led by sharp rises in energy and food costs.
While investors have already been girding for a Federal Reserve move to bring interest rates off their super-low levels, the recent data seem to be suggesting the Fed may have misread the inflation signals and must now act more aggressively that anticipated.
"Price increases are heating up at an alarming rate," said John Silvia at Wachovia Securities.
"The Fed and most forecasters missed the mark on inflation so badly because they failed to appreciate how much and how broadly final demand has accelerated."
"Fed officials have been trying to convince the market that they will be raising rates `at a measured pace,' but the market sees a replay of 1994 when the Fed raised the funds rate by 300 basis points in 12 months," said David Rosenberg at Merrill Lynch.
"The debate over Fed tightening has shifted from `when' to `how much' and `how quickly?'"
Technical analyst Ralph Acampora at Prudential Securities said the market is having a hard time casting off its nerves.
"The recent equity environment seems to be running to script as the market attempts to recoup after the broad-based selling barrage of last week," he said.
"Unfortunately, the three days of stabilization that we have seen through yesterday's session have lacked upside conviction ... We continue to maintain a very selective and defensive posture."
"I think the market is trying to stabilize," said Peter Cardillo at SW Bach. "The Fed needs to take a pre-emptive strike so that the market can focus on earnings and good economic numbers."
Rod Smyth at Wachovia Securities notes that despite a robust economy and corporate earnings, stocks have held back.
"The stock market is a discounting mechanism and is always looking into the future. Thus stocks tend to do best when when investors expect economic acceleration -- for example a year ago," he said.
"Looking forward from today, investors are dealing with the prospect of higher interest rates, persistently high energy prices and political uncertainty. In our opinion these are the reasons why the stock market has been unable to rise above its first quarter highs."
Alfred Goldman at AG Edwards said the market is suffering from uncertainty.
"The market can't make up its mind. Is it a bull or a bear? Does it have horns or claws?" he said.
"That's enough confusion to cause those of us who have to analyze the beast a great deal of heartburn and sleepless nights Higher rates will slow the economy down a bit, but that is exactly what the Fed wants and something investors should welcome. Unfortunately, the negative side of our split personality market says the opposite."
The heightened inflation fears also roiled the bond market. The yield on the 10-year US Treasury bond jumped to 4.788 percent from 4.766 percent a week earlier and that on the 30-year bond to 5.503 percent from 5.464 percent. Bond yields and prices move in opposite directions.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last