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US Stocks Sink Again on Inflation      05/12 16:20

   Inflation worries rattled Wall Street Wednesday, pulling the Dow Jones 
Industrial Average more than 680 points lower and placing the major stock 
indexes on track for their worst week in more than six months.

   (AP) -- Inflation worries rattled Wall Street Wednesday, pulling the Dow 
Jones Industrial Average more than 680 points lower and placing the major stock 
indexes on track for their worst week in more than six months.

   The selling came as investors reacted to a surprisingly big jump in 
inflation last month that stoked concerns that the economy may bounce back too 
fast from its pandemic-induced doldrums.

   Tech giants, which had soared during the past year of lockdowns, took some 
of the biggest losses. Only energy stocks eked out a small gain.

   Bond yields snapped higher after the government reported that consumer 
prices rose 0.8% in April, more than expected, and prices rose year-over-year 
at the fastest rate since 2008.

   The yield on the 10-year Treasury note rose to 1.69% from 1.62% a day 
earlier, a big move. Bond yields rise when investors fear that an increase in 
inflation will erode the future value of the income that bonds pay.

   "Inflation and interest rate jitters are hitting the market today, but for 
now the sell-off has been orderly," said Cliff Hodge, chief investment officer 
for Cornerstone Wealth. "Letting some air out of these sky-high valuations is a 
positive going forward."

   The S&P 500 lost 89.06 points, or 2.1%, to 4,063.04, its biggest one-day 
drop since late February.

   The Dow fell 681.50 points, or 2%, to 33,587.66, the worst decline for the 
blue chip index since late January. The Nasdaq gave up 357.75 points, or 2.7%, 
to 13,031.68. It was the tech-heavy index's largest pullback since mid-March.

   Small company stocks also gave up the most ground. The Russell 2000 index 
fell 71.85 points, or 3.3%, to 2,135.14.

   Inflation concerns have been hitting the stock market hard this week. The 
S&P 500, Nasdaq and Dow are on track for their biggest weekly loss since Oct. 
30. The Dow and S&P 500 had set all-time highs just last Friday.

   Investors have been worrying that inflation could return after being absent 
for many years as the economy revs out of the recession brought on by the 
pandemic. Federal Reserve officials and other economists have said moderate 
inflation may actually be a good thing in a recovery.

   While the latest reading on inflation was hotter than expected, the market 
shouldn't be too surprised about inflation rising, said Jeff Buchbinder, equity 
strategist at LPL Financial. The prevailing sentiment is that rising inflation 
will be temporary, though "it's too early to say whether these higher levels 
are going to be sustained," he said.

   The surge inflation is a reflection of the pent-up demand in the economy, 
said Terry DuFrene, global investment specialist at J.P. Morgan Private Bank.

   "This is not a repeat of the 1980s, when we had hyperinflation," he said. 
"This is not something that's going to be permanent."

   Concerns about rising inflation also raise the question of whether the 
Federal Reserve will change its posture on maintaining low interest rates as 
the economy recovers. Buchbinder said investors shouldn't expect that to happen 
any time soon, however, given that the economy, and particularly the job 
market, are still a long way from being fully recovered.

   "Really the Fed has one mandate right now, which is to regain full 
employment, and it's going to take some time," Buchbinder said.

   Analysts expect consumer prices to rise as the economy recovers, but higher 
prices could run the risk of curtailing some spending, which the economy needs 
to sustain its recovery. The cost of new cars rose 0.5% in April, the largest 
increase since last July, because of heavy demand and a computer chip shortage 
that has slowed production and reduced dealer supplies.

   Rising inflation makes stocks seem more expensive, particularly high-value 
tech stocks that trade on the potential for their future profits in coming 
years. Apple, Microsoft and Amazon all fell more than 2%.

   Tesla fell 4.4%, bringing its pullback so far this month to nearly 17%. That 
has the electric car maker's stock on pace for its worst month since the 
pandemic plunge of March 2020, when it lost 21.6%.

   Energy prices continued to climb following the shutdown of a major gas 
pipeline on the East Coast earlier in the week, and there are now reports of 
gasoline hoarding happening in places like North Carolina.

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