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Midday Report: US Stocks Drop While Yields Advance as Inflation Worries Undermine Sentiment

05/11/2021 09:00

01:00 PM EDT, 05/11/2021 (MT Newswires) -- US stocks fell and government bond yields rose as investors attempted to eliminate the base-effect distortion from the headline inflation rate that's due out Wednesday and forecast to hit a decade high in April.

The Dow Jones Industrial Average plummeted by 1.7% to 34,151.99, with S&P 500 down 1.3% and Nasdaq lower by 0.6%. Energy and industrials were among the steepest decliners, with all sectors in the red after midday on Tuesday.

The US 10-year yield climbed by 1.8 basis points to 1.62%. The CBOE's volatility index, VIX, jumped 11% intraday, the highest level in a month.

The latest Consumer Price Index report will offer further insight into the assessment and outlook for price trends in the US, according to Stifel. The base effects are expected to continue to "distort" the headline numbers in the coming months with the annual rate expected to push over 3.5% in April. That rate, as per data compiled by Trading Economics, is the highest since early 2011.

"According to the Fed, higher rates of inflation are primarily the reflection of reflation with the lower lows of 2020 falling out of this year's calculation," Chief Economist Lindsey Piegza said. "It is also a reflection of a temporary recalibration of supply and demand as the US economy -- and the global economy -- reopens and recovers to pre-pandemic activity and consumers adjust their spending habits back to pre-crisis levels."

Consumer prices in Brazil jumped 6.8% year over year in April, the strongest since November 2016, but were in line with market expectations, according to data compiled by Trading Economics. China's annual inflation rate jumped to 0.9% from 0.4% in March and compared with a market consensus of 1%, the data showed.

In company news, NortonLifeLock (NLOK) reported fiscal fourth-quarter sales and earnings that beat forecasts, unveiled a $1.5 billion share repurchase authorization while setting first-quarter guidance. Shares jumped by 9.5% intraday, the most on S&P 500.

The worst performer on the index was HanesBrands (HBI), down 14%. The company said it will strategically invest in brands and e-commerce to deliver growth across owned channels and retail partnerships. It set out plans to increase sales to about $7.4 billion by 2024 from $6.25 billion in 2021.

In the precious metals markets, gold was down by 0.1% to $1,836.10, silver was up 0.6% to $27.65 an ounce and copper was up 0.9% to $4.76 per pound.

Among energy ETFs, the United States Oil Fund rose 0.3% to $44.61 and the United States Natural Gas Fund was up 0.2% to $10.52. Among precious-metal funds, the Market Vectors Gold Miners ETF was down 0.5% to $37.33 and SPDR Gold Shares were down 0.2% to $171.83. The iShares Silver Trust was up 0.7% to $25.51.