US Producer Price Index at 11%... Inflation Concerns Persist
Investor Sentiment Weakens Amid Cryptocurrency Plunge... Only Nasdaq Shows Slight Rebound
[Asia Economy Reporter Hyunwoo Lee] The New York stock market showed mixed trends as inflation concerns persisted and risk aversion grew following the recent sharp decline in cryptocurrencies. While the Dow Jones Industrial Average fell for six consecutive trading days and the S&P 500 index hit a yearly low, only the Nasdaq index closed with a slight rebound at the end of the session.
On the 12th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average dropped 103.81 points (0.33%) from the previous close to 31,730.30. The S&P 500 index fell 5.10 points (0.13%) to 3,930.08, marking a new yearly low. However, the tech-heavy Nasdaq index closed up 6.73 points (0.06%) at 11,370.96.
On this day, the S&P 500 index declined 18.44% from its 52-week high, approaching the threshold for entering a technical bear market. Generally, a drop of more than 20% from the 52-week high is considered the start of a technical bear market.
The New York stock market started lower due to ongoing inflation concerns and instability in the cryptocurrency market, which weakened investor sentiment. In particular, the U.S. Producer Price Index (PPI) for April recorded an 11% increase year-over-year, following last month's 11.5%, marking another double-digit high and spreading inflation worries.
However, the U.S. PPI, on a seasonally adjusted basis, rose 0.5% month-over-month, lower than the previous month's 1.6% increase. The April core PPI, excluding food, energy, and trade services, rose 0.6% month-over-month. The April core PPI matched market expectations, rising 6.9% year-over-year, showing a slowdown from the revised 7.1% increase in the previous month.
Following the PPI release, the yield on the U.S. 10-year Treasury note fell. The 10-year yield dropped to as low as 2.81% during the session. The 2-year Treasury yield also fell to around 2.5%. Concerns over economic slowdown due to inflationary pressures and a flight to safety amid the cryptocurrency crash led to rising Treasury prices.
Instability in the cryptocurrency market, including the collapse of Luna and the stablecoin TerraUSD (UST), further weakened investor sentiment. This is seen as an increased risk aversion toward risky assets overall. Luna's value plummeted about 99% intraday to 1 cent. The world's largest stablecoin, Tether, fell below its pegged $1, and Bitcoin prices dropped more than 3%, breaking below the $26,000 level.
Among major tech stocks, Apple, Microsoft, and Nvidia shares fell more than 2%, while Amazon and Meta shares rebounded more than 1%. Walt Disney's stock declined about 0.9% despite weak earnings, due to news of increased streaming subscribers. Electric vehicle maker Rivian's stock surged more than 17% on news that losses were smaller than expected.
Within the 11 sectors of the S&P 500 index, utilities, technology, financials, materials, and consumer staples stocks declined, while healthcare, consumer discretionary, communication services, real estate, and industrial stocks rose.
New York market experts analyzed that the market has begun to price in recession concerns. Luke Phillip, Head of Investment at SYZ Private Banking, told the Wall Street Journal (WSJ), "The market is worried that central banks' efforts to curb inflation could trigger a recession or at least a sharp economic slowdown," adding, "Looking at yesterday's consumer price data, it is still a bit early to say that inflation has peaked."
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