Actions turn, close; yields fall after US inflation data

NEW YORK, May 11 (Reuters) – Wall Street stocks closed sharply lower and Treasury yields fell in Wednesday’s volatile session as oil prices rallied and investors worried. the potential for an economic slowdown.

US stocks saw their indexes rise and fall during the session as investors looked to US inflation data for clues on the Federal Reserve’s rate hike path.

US data showed higher-than-expected core inflation, excluding things like oil prices. Some investors seemed encouraged by the annual change in consumer price growth to 8.3% in April from 8.5% in March, although it was higher than analysts’ estimate of 8.1%. Read more

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While some investors were encouraged by the year-over-year improvement, others noted that inflation was still scorching and this was evidenced by the rally in oil futures.

“This is a concern about a recession. The inflation numbers we got this morning were not good, worse than expected… There are high food prices and higher inflation numbers. more concerns are going to be sticky on the high side,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder.

The strategist also pointed to the flattening of the yield curve, referring to the difference between long-term and short-term Treasury yields as a worrying sign.

“We have a very flat yield curve that is flirting with inversion. It scares traders off about the prospects of a recession. There are too many investors who think the Fed can stage a soft landing. more and more doubtful.

The Dow Jones Industrial Average (.DJI) fell 326.63 points, or 1.02%, to 31,834.11, the S&P 500 (.SPX) lost 65.87 points, or 1.65%, to 3,935.18 and the Nasdaq Composite (.IXIC) fell 373.44 points, or 3.18%, to 11,364.24.

The S&P closed at its lowest level since March 25, 2021 and 18% below its January 3 high. The Nasdaq lagged its peers sharply as interest rate-sensitive growth sectors technology (.SPLRCT) and consumer discretionary (.SPLRCD) underperformed the rest of the market, also closing down. more than 3%.

The MSCI gauge of stocks across the world (.MIWD00000PUS) lost 0.88%, posting its lowest close since November 2020.

Earlier, Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis, had his glass half full by pointing out that inflation, while still elevated, appeared to be starting to moderate.

“At the end of the day, we can be all excited about whether it’s a little higher or a little lower, but clearly the year-over-year inflation rate has come down and seems to have peaked in March. It seems to have turned the corner,” he said.

The US Dollar first gained ground after the inflation news, then fell, but edged higher late in the session. Read more

The dollar index, which measures the greenback against a basket of major currencies, was 0.067%, with the euro down 0.13% at $1.0513.

The Japanese yen strengthened 0.35% against the greenback to 129.97 to the dollar, while the pound last traded at $1.2245, down 0.62% on the day.

At the start of trading, yields on benchmark 10-year Treasuries had fallen to their lowest levels in a week. But after the inflation data, yields rallied to the three-year high of 3.203% hit on Monday before falling back.

Benchmark 10-year notes last rose 20/32 to 2.9148%, down from 2.993% on Monday night. The 30-year bond last rose 57/32 to 3.026% from 3.129%, while the 2-year bond last fell 1/32 to 2.6371%, against 2.623%. [nL2N2X31QZ]

“The volatility of all markets is really something, the bullwhip aspect of the day,” said Lou Brien, market strategist at DRW Trading. “You see a bit of a flight to safety and maybe the idea that even with the CPI today we’re going to flatten the curve again.”

Oil prices rose on Wednesday after Russian gas flows to Europe plummeted and Russia sanctioned some European gas companies, adding to uncertainty in global energy markets.

U.S. crude oil futures settled at $105.71 a barrel, up $5.95 or 5.96%, while Brent oil futures settled at $107.51 per barrel up $5.05 or 4.93%.

Spot gold added 0.8% to $1,852.79 an ounce. [nL3N2X32VB]

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Reporting by Sinéad Carew, Herb Lash and Caroline Valetkevitch in New York, Danilo Masoni in Milan, Sujata Rao in London and Alun John in Hong Kong, Editing by William Maclean, Tomasz Janowski, Angus MacSwan and David Gregorio

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