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Dow Falls on Tech Wreck as Yields Hitch Ride on Inflation Wave -Breaking


© Reuters.

By Yasin Ebrahim — The Dow on Friday suffered its biggest weekly selloff as an unexpected step-up in the pace of inflation sent Treasury yields surging and put the screws on growth sectors of the economy amid bets for more aggressive Federal Reserve rate hikes. 

8.80 points) The decline in the indices was 2.7%.

Consumer price index rose above 0.7%, exceeding expectations and surpassing economists’ predictions of 8.3%.

The Fed should be concerned that the inflation factors driving the rise in inflation are not limited to supply-chain problems. Shelter, food, and gas lead the way. This is a troubling signal.

“The Federal Reserve is committed to reducing demand to meet a supply-constrained world. This inflation reading will strengthen that resolve,” Yelena Maleyev, economist at Grant Thornton said in a note.        

Treasury yields rose on speculation that the Fed would have to offer 50 basis points at its next three meetings. This will put tech and other growth markets, which are susceptible to rising rates on the backfoot.

Apple (NASDAQ 🙂 lost more than 3%. Meta Platforms (NASDAQ 🙂 and Microsoft(NASDAQ 🙂 were down 4%. This was the largest drop in tech.

The selloff was also influenced by consumer discretionary, mainly travel and leisure stocks. This is due to fears of red-hot inflation that will further reduce consumer spending.

Caesars Entertainment (NASDAQ:), Royal Caribbean MGM Resorts, Booking and (NYSE) were the worst-performing sectors.

“The pace of consumer spending is going to slow, we’ve already seen that in the choices they are making,” Chief Strategist at Spouting Rock Asset Management Rhys Williams told in an interview on Friday.

“There’s been a few anecdotes that even on services like cruises, demand is down for next year,” Williams added. “People are a little bit shocked by how much things cost.”

Banks drove financials lower as the Treasury yield curve flattened on fears of an impending recession.  

Signature Bank (NASDAQ:), Capital One Synchrony and Financial (NYSE;) fell with Synchrony, which has been sensitive to cryptocurrency. They also suffered additional pressure due to a crypto crash. 

The decline was more than 2 percent, and the drop in 52-weeks of 6%.