Stocks resumed their slide today as concerns about rising inflation trumped a raft of upbeat quarterly reports, including better-than-expected results from Caterpillar and Intel.
The Dow Jones industrial average lost more than 115 points, settling just a whisper above the 10,000 mark.
With 1,200 companies releasing earnings this week, investors have plenty of corporate news to sift through, but the US economy remains in the spotlight.
Stocks sank after the release of the Federal Reserve’s “Beige Book” survey, which reported expansion of business activity from late February to early April, but “uneven progress” in some parts of the country, and higher inflation.
Analysts said the day’s trading underscored the level of fear on Wall Street following last week’s massive sell-off.
“The action last week was pretty destructive to the technical health of the market. That’s not to say we’re doomed to a larger correction, but I think the damage done last week is not easily undone,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland. ”There’s been good earnings news … but it seems to me good news is not having as big an effect on stock prices as bad news is having.”
The Dow closed down 115.05, or 1.14%, at 10,012.36, having suffered three triple-digit drops in a row last week. It was the Dow’s lowest close since October; the index of 30 actively traded industrial stocks last closed below 10,000 on October 26.
The broader gauges were also lower. The Standard & Poor’s 500 index slid 15.28, or 1.33%, to close at 1,137.50. The Nasdaq composite index lost 18.60, or 0.96%, to 1,913.76.
Treasury prices were mixed, and the yield on the 10-year note fell to 4.20%, down from 4.21% late on Tuesday. The dollar fell slightly against the euro and the Japanese yen on Wednesday, extending its losses in the face of the inflationary data; gold prices rose. Oil futures were volatile, climbing 15 cents to settle at 52.44 on the New York Mercantile Exchange, after the government’s weekly fuel inventory report showed a decline in crude and gasoline stores; analysts had expected a build for both.
The Fed report, which is based on a survey of its 12 regional banks, found rising prices for energy and other commodities were a significant concern across sectors. Retailers and tourism companies in many regions expressed worry that high energy prices were already dampening business prospects or might soon. Known for the colour of its cover, the Beige Book will be used when Fed policy-makers next meet to set interest rates on May 3.
Inflationary pressures were also highlighted by the Labour Department’s latest reading of the Consumer Price Index, the most closely watched inflation gauge. Consumer prices jumped 0.6% in March, the biggest surge in five months as costs rose sharply for everything from energy and food to clothing, hotel rooms, airline tickets and medical care.
Pricing pressures were significant, even excluding the volatile costs of food and energy. The so-called core rate of inflation rose by a worrisome 0.4%, the largest jump in 2.5 years and double what economists had expected. Still, some analysts said concerns about inflation were overblown.
“Any concern about the CPI, and how it’s going to affect the market because of a more aggressive Federal Reserve, are overstated,” said Arthur Hogan, chief market analyst at Jefferies & Co. in Boston. “The real focus should be corporate America and earnings and guidance, and that has been better than expected. The fact is, some household names are giving us great news on the earnings front.”
Intel added 3 cents to 22.66 after the chip maker reported robust profits and sales thanks to the continued popularity of notebook computers and their relatively pricier microprocessors. The results easily beat Wall Street estimates, and Intel said its growth is expected to continue in the current quarter.
Yahoo gained 4.3%, or 1.43, to 34.65, after the search powerhouse doubled its first-quarter profits on a rising tide of online advertising. Per-share earnings beat expectations by 3 cents. Yahoo’s growth reflects the increasing amount of time consumers are spending online, curtailing their exposure to television, radio, newspapers and magazines.
The Russell 2000 index, which tracks smaller company stocks, was down 9.98, or 1.68%, at 584.96.
Decliners outnumbered advancing issues by 3 to 1 on the New York Stock Exchange.