[New York Stock Market] Inflation at 8.5% and Nasdaq Closes Lower for 3rd Day... Oil Prices Surge 6%

[Image source=EPA Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed slightly lower on the 12th (local time) as inflation indicators hit the highest levels in over 40 years. The U.S. March Consumer Price Index (CPI) rose by 8.5% due to the impact of the Ukraine crisis, leading to expectations that the central bank, the Federal Reserve (Fed), will accelerate monetary tightening.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,220.36, down 87.72 points (0.26%) from the previous session. The S&P 500, which focuses on large-cap stocks, ended the day at 4,397.45, down 15.08 points (0.34%). The tech-heavy Nasdaq index fell for the third consecutive trading day, dropping 40.38 points (0.30%) to 13,371.57.

Among individual stocks, many tech stocks sensitive to interest rates showed weakness. Microsoft (-1.12%), Nvidia (-1.88%), AMD (-2.33%), and Netflix (-1.12%) all declined compared to the previous session. On the other hand, leading tech stocks Tesla (+1.13%) and Apple (+1.15%) closed higher.

Energy stocks rose alongside international oil prices, which surged more than 6% following news of partial easing of lockdowns in Shanghai, China. Marathon Oil closed up 4.16% from the previous session. Occidental Petroleum rose 2.11%, Chevron 2.08%, and Devon Energy increased by 3.71%.

Investors focused on the March CPI released that day, the resulting movements in U.S. Treasury yields, and the possibility of accelerated Fed tightening. As expected, the March CPI jumped sharply due to the impact of Russia's invasion of Ukraine. According to the Department of Labor, the March CPI rose 8.5% compared to the same month last year, marking the largest increase in 40 years since December 1981. It also rose 1.2% compared to the previous month. Excluding volatile food and energy prices, the core CPI for March increased 6.5% year-over-year and 0.3% month-over-month.

Before the market opened, the U.S. 10-year Treasury yield was around 2.8%, but after the CPI announcement, it fell intraday to around 2.67%. It is currently hovering around 2.72%.

These inflation indicators have led to a dominant view that Fed tightening will accelerate. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds (FF) rate futures market reflects more than an 86% probability of a 0.5 percentage point "big step" rate hike at the May FOMC meeting. Jeremy Siegel, a professor at the Wharton School, appeared on CNBC and said, "High inflation will continue for the next few months," adding, "For the Fed to ease inflation, rates need to rise above 3.5%."

However, some suggest that the March CPI may indicate that inflation has peaked. Since this was already anticipated by the market, the impact could be limited. Craig Erlam, senior market analyst at OANDA, said, "There was nothing in the data that was a big surprise to the upside," and added, "It probably gave the market the impression that inflation may have reached its peak."

Oil prices rose on news that Shanghai partially eased its city-wide lockdown. On the New York Mercantile Exchange, May West Texas Intermediate (WTI) crude oil closed at $100.60 per barrel, up $6.31 (6.7%) from the previous session. This marks a return to the $100-per-barrel level for the first time in a week since the 5th.

Investors are also paying attention to this week’s earnings season. Starting on the 13th, the first-quarter earnings season will begin with reports from JPMorgan and Delta Air Lines.