Tech Sends Stocks Down With Inflation Angst Rising: Markets Wrap

(Bloomberg) -- Technology shares led U.S. stocks mostly lower as surging commodity prices stoked concern about whether inflation will derail a growth rebound in the world’s largest economy and spoil a record stock rally.

The tech-heavy Nasdaq Composite Index declined for the first time in three sessions amid the growing anxiety over inflation, which can threaten longer-horizon revenues typical of the sector. Alphabet and Facebook were downgraded to neutral from buy at Citigroup. The Dow Jones Industrial Average rose to a record high, while the benchmark S&P 500 was little changed. Treasury yields steadied as traders brace for a busy week of auctions.

“People have been gravitating to value -- now you can find growth outside of tech,” said Keith Lerner, chief market strategist at Truist Advisory Services. “As inflation expectations continue to move higher, that’s more beneficial for the value side of the trade.”

Copper jumped to a record while iron ore futures surged more than 10%, adding to concern about inflation. West Texas Intermediate and Brent both rose as gasoline surged as much as 4.2% to the highest since May 2018 after a cyberattack forced the closure of a key U.S. pipeline. Shares of copper producer Freeport-McMoRan Inc. rose.

Meanwhile, the pound climbed to its highest level since February after U.K. elections denied Scotland’s main independence party an outright majority and strengthened the grip of the Conservatives.

The run-up in raw materials is intensifying debate ahead of a U.S. CPI report Wednesday that is forecast to show price pressures increased in April. The data will be closely watched by policy makers at the Federal Reserve trying to gauge the speed of the recovery after job growth significantly undershot forecasts.

“The strong inflation figures that are expected this week could change the market narrative and raise concerns about the risk that inflation pressures are picking up significantly, even if the real economic recovery will remain far from complete for some time,” according to Credit Agricole SA strategists led by Jean-Francois Paren. “If this is the case, it could weigh on risk appetite in the coming days and weeks.”

European stocks were little changed, with significant gains in miners offset by a slump in travel shares after the U.K. opened tourist travel to fewer destinations than hoped.

The MLIV Question of the Day: How Could Highest CPI in Decade Hit Assets?

Here are some key events to watch this week:

• A range of Fed speakers are due this week, including Chicago Fed President Charles Evans on the economic outlook Monday and U.S. Fed Governor Lael Brainard on Tuesday, among others
• Chinese inflation data are due Tuesday
• OPEC monthly Oil Market Report is published with global demand forecasts and production estimates Tuesday
• U.S. CPI report Wednesday is forecast to show prices continued to increase in April
• Bank of England Governor Andrew Bailey speaks Wednesday

These are some of the main moves in markets:

Stocks

• The S&P 500 fell 0.1%, more than any closing loss since May 4 as of 10:07 a.m. New York time
• The Nasdaq 100 fell 1.5%, more than any closing loss since May 4
• The Dow Jones Industrial Average rose 0.6% to a record high
• The Stoxx Europe 600 was little changed
• The MSCI World index fell 0%, more than any closing loss since May 4

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%, falling for the fourth straight day, the longest losing streak since April 19
• The euro was little changed at $1.2163
• The British pound surged 1%, more than any closing gain since April 19
• The Japanese yen fell 0.1% to 108.76 per dollar

Bonds

• The yield on 10-year Treasuries declined one basis point to 1.56%
• Germany’s 10-year yield advanced zero basis points, climbing for the fourth straight day, the longest winning streak since April 29
• Britain’s 10-year yield advanced two basis points to 0.79%

Commodities

• West Texas Intermediate crude fell 0.6% to $64 a barrel
• Gold futures rose 0.4%, climbing for the fourth straight day, the longest winning streak since Feb. 10

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