Stock Market News for May 13, 2021
Benchmarks closed in the red on Wednesday after the Labor Department reported that inflation accelerated at the fastest pace since 2008 in April. The news triggered a massive sell-off among technology stocks as investors reassessed their high valuations in the face of inflation.
The Dow Jones Industrial Average (DJI) fell 681.76 points, or 2%, to close at 33,587.66 and the S&P 500 slipped 89.06 points, or 2.1%, to close at 4,063.04. The Nasdaq Composite Index closed at 13,031.68, shedding 357.75 points, or 2.7%. The fear-gauge CBOE Volatility Index (VIX) increased 26.3%, to close at 27.59. Declining issues outnumbered advancing ones for 6.05-to-1 ratio on the NYSE, while a 3.84-to-1 ratio on the Nasdaq favored decliners.
How Did the Benchmarks Perform?
On Wednesday, the Dow suffered its biggest one-day percentage decline since Jan 29, dropping 713 points at its session low. Most of the blue-chip index’s stocks ended in the red, with shares of Honeywell International Inc. HON and The Home Depot, Inc. HD closing more than 4% lower for the session. Both the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
With a 2.1% decline, the S&P 500 has its biggest drop since February. Of the 11 major sectors, only the energy sector closed in the green as it tends to do well in an inflationary environment. Occidental Petroleum Corporation OXY was among the energy sector’s highest gainer adding 2.4% and other big names like Exxon Mobil Corporation XOM and Chevron Corporation CVX added at least 0.5% on Wednesday.
High valuation tech stocks suffered the most pushing the Nasdaq into the negative territory, and the Technology Select Sector SPDR Fund (XLK) closed 2.8% lower. Shares of tech behemoths like Microsoft Corporation MSFT, Netflix, Inc. NFLX, Amazon.com, Inc. AMZN and Apple Inc. AAPL fell more than 2%, while Tesla, Inc. TSLA and Alphabet Inc. GOOGL closed 4.4% and 3.1% lower, respectively. The Nasdaq’s highest decliners were Applied Materials, Inc. AMAT and Marvell Technology, Inc. MRVL that dropped 7% and 6.1%, respectively.
On Wednesday, the S&P 500 posted nine new 52-week highs and no new lows, while the Nasdaq Composite recorded 34 new highs and 118 new lows. A total of 11.82 billion shares were traded yesterday, higher than the last 20-session average of 10.44 billion.
Hotter-than-expected Inflation Triggers Massive Selling
The U.S. Bureau of Labor Statistics on Wednesday reported that the Consumer Price Index (CPI) rose 0.8% in April and 4.2% from a year earlier. The index which measures a basket of goods and includes energy and housing costs had a consensus estimate of a 0.2% rise. Inflation has accelerated at its fastest pace in nearly 13 years as the US economy moves in the path of recovery from the pandemic and prices have jumped higher-than-expected.
Core CPI that excludes volatile food and energy prices has increased 0.9% in April, surpassing the consensus estimate of a 0.3% rise and is 3% higher than the same period last year. The monthly gain in core inflation was the largest since 1981. Overall, energy prices have jumped 25% from a year ago. Bottlenecks in supply from a number of factors have been the prime reason behind the increase in price.
Investors have been skeptical regarding the pick-up in inflation in the prior session, however, yesterday’s data instilled fear and led to massive selling. Wall Street’s fear gauge VIX also jumped to 27.59 and technology shares suffered the most as investors reevaluated their high valuation.
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Microsoft Corporation (MSFT) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
The Home Depot, Inc. (HD) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Chevron Corporation (CVX) : Free Stock Analysis Report
Honeywell International Inc. (HON) : Free Stock Analysis Report
Marvell Technology, Inc. (MRVL) : Free Stock Analysis Report
Applied Materials, Inc. (AMAT) : Free Stock Analysis Report
Netflix, Inc. (NFLX) : Free Stock Analysis Report
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
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