Updated at 1:19 pm EST
U.S. stocks traded lower Wednesday, sharply reversing early pre-market gains, after April inflation data showed a stubborn stickiness in core consumer price pressures, offsetting the impact of an easing in the headline reading, as investors searched for relief from the market’s ongoing weakness.
April inflation pressures were expected to have eased modestly from the early 1981 highs recorded over the month of March, although it remains to be seen as to whether that will signal both a peak in U.S. inflation pressures and change in Federal Reserve’s vow to bring consumer prices down through a series of interest rate hikes and bond sales that comprise the most aggressive central bank tightening in a generation.
Comments yesterday from Cleveland Fed President Loretta Mester, however, suggested that any change in strategy isn’t likely to come soon, as she told Yahoo Finance that the central bank wouldn’t rule out a 75 basis point rate hike “forever” and must remain committed to curbing the fastest inflation in 40 years.
The headline consumer price index for the month of April was estimated to have risen 8.3% from last year, down from the 8.5% pace in March, which was the fastest rate since December of 1981. On a monthly basis, inflation was up 0.3%, the BLS said, compared to the March surge of 1.2%
However, so-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.6% on the month, and 6.2% on the year
Inflation readings from both Germany and China earlier today also indicated faster readings for the world’s two biggest export economies, while European Central Bank President Christine Lagarde indicated that rate hikes from Frankfurt could come “a few weeks” after the wind-down of its bond purchases later this summer.
“Core inflation rose at the fastest pace since January (and) while the upside surprise is unlikely to change the Fed’s objective, it clearly makes their job more challenging,” said Charlie Ripley, senior investment strategist at Allianz Investment Management in Minneapolis. “Inflation appears to be entrenched within many areas of the economy and regardless if we have witnessed inflation peak, a persistently slow grind lower will be more problematic for the Fed to simultaneously cool inflation without tipping the economy into recession.”
Scroll to Continue
In other markets, the U.S. dollar index, which tracks the greenback against a basket of its global currency peers, fell 0.2% from a near 20-year high of 103.81 following the inflation data while benchmark 10-year Treasury note yields jumped 8 basis points to 3.06% before easing to 2.923%.
Oil was also active after the Energy Department’s weekly data release on crude stocks showed a bigger-than-expected 8.5 million barrel increase last week, but noted the Strategic Petroleum Reserve falling by a record 7 million barrels to a May 2001 low of 543 million barrels.
WTI futures for June delivery rose $6.28 to $106.04 per barrel while Brent crude surged $5.36 to $107.81.
Bitcoin prices fell below the $30,000 mark amid an overnight plunge in the so-called stablecoin TerraUSD, also known as UST, which is designed to trade on a one-to-one basis against the U.S. dollar. The coin was last seen at around 40 cents, with founder Do Kwon urging players to “sit tight” as its designers formulated a rescue plan.
The CBOE’s VIX index, also known as Wall Street’s ‘fear gauge’, eased from the highest levels since early March, but was still notably elevated at 32.16 points.
On Wall Street, the Dow Jones Industrial Average was marked 115 points lower in early Wednesday afternoon trading while the S&P 500, which is down 16% for the year, fell 28 points into the green. The tech-focused Nasdaq fell 225 points.
In single-stock trading, Coinbase Global (COIN) shares plunged 24% after the cryptocurrency trading platform posted weaker-than-expected first quarter revenues and cautioned that activity would likely continue to slide amid the ongoing upheaval in digital currency markets.
Walt Disney Co. (DIS) – Get Walt Disney Company Report shares moved 1% lower ahead of the media and entertainment group’s second quarter earnings after the close of trading.
Philip Morris International (PM) – Get Philip Morris International Inc. Report shares rose 3.7% after the maker of Marlboro cigarettes made a recommended offer of around $16 billion for Swedish Match (SWMAY) as the tobacco giant looks for smoke-free growth prospects in global nicotine markets.