The tech sector drives stocks down because inflation is still high.

Stocks fell on Wednesday as more tech companies fell on Wall Street after reports on inflation were worse than feared.

After hovering between gains and losses in the morning trade, the early rally disappeared as the S&P 500 fell 1.6%. This slide cleared all the bullish gains from the previous day, when the benchmark index had a three-day decline.

The Dow Jones Industrial Average fell 1% and the Nasdaq Composite fell 3.2%. Tech stocks are putting pressure on the market as a whole. Each of the three major indices is seeing another sharp weekly decline.

Wall Street is obsessed with high inflation in the US and where it is heading. This is because the Fed has robbed the market of support it had held for most of the pandemic. The Fed aggressively raised rates after seeing high inflation lasting longer than expected.

According to a report by the U.S. Department of Labor Wednesday, Inflation slows in April, decreased from 8.5% in March to 8.3%. Investors also found signs in the data that inflation has peaked and is likely to ease further.

Nevertheless, the figure was still higher than economists had predicted. They also saw bigger-than-expected gains in prices other than food and gasoline, which economists call “core inflation” and better predict future trends.

“Core inflation is hot, and that’s what’s really important to the Fed at this point,” said Brian Jacobson, senior investment strategist at Allspring Global Investments.

Economists say the inflation report will allow the Fed to raise rates quickly and potentially sharply in the coming months.

Treasury yields surged at first but declined as the morning progressed. The 10-year Treasury yield soared to 3.08% but fell to 2.92% in subsequent trades, below the 2.99% level at the end of Tuesday. The two-year yield rose to 2.64% from 2.62% late Tuesday, which further boosts expectations for Fed action. Shortly after the report was released, it soared to 2.75%.

As yields retreated briefly, most stocks reversed their initial losses, but gains were not maintained.

“Last week it was really hard to sustain any kind of profit,” said Ross Mayfield, investment strategy analyst at Baird. “It’s just a seller’s market now.”

The S&P 500 fell 65.87 points to 3,935.18 and the Nasdaq closed at 11,364.24, down 373.44 points. Both indices were down for the fifth straight week so far this week.

The Dow fell 326.63 points to close at 31,834.11. The blue-chip stock index recorded a six-game losing streak.

Small-cap stocks also fell. The Russell 2000 closed down 43.65 points, or 2.5%, at 1,718.14.

To prevent high inflation, the Fed has already cut key short-term rates from near-zero all-time lows. He also said that at the next meeting, they could continue to increase their rates by doubling their usual rates. On purpose, such a move would slow the economy to contain inflation.

The Fed risks a recession if it raises rates too high or too quickly. Even if you’re adept enough to avoid a recession, high interest rates keep prices down for stocks and all kinds of investments in the meantime. Because high-yielding, safe Treasury bonds suddenly become a stronger competitor to the investor’s dollar.

“Inflation and the Fed’s reaction are the main concerns in the market right now,” said David Lefkowitz, head of Americas equity at UBS Global Wealth Management. “To help markets become more accustomed to a soft landing, we will focus on inflation data and clues about what the Fed thinks about it.”

Higher interest rates are the hardest hit for investments that have been the biggest winners in the ultra-low rates of the pandemic. This includes large tech companies, other high-growth stocks and cryptocurrencies. For example, a loss of more than 27% on the Nasdaq this year is far worse than a loss of about 17% on the S&P 500.

Cryptocurrency trading platform Coinbase fell 26.4% after reporting its recent quarterly earnings that were much weaker than analysts had expected. Cryptocurrency price declines affected trading volume during the quarter.

Several other companies have taken major moves following the announcement of their recent earnings results. Hamburger chain Wendy’s fell 10.8% after reporting disappointing profits. Callaway Golf surged 10.2% and H&R Block surged 19.5% after reporting encouraging financial results.

It’s not just interest rates that are driving the market down. in China, Shutdown to stop the spread of COVID-19 It increases the risk of supply chain disruption for global companies and a slowdown in the world’s second-largest economy.

that much war in ukraineMeanwhile, disruptions in oil and natural gas markets are threatening to keep inflation high.

Crude oil surged again on Wednesday and benchmark US crude rose 6% to $105.71 a barrel. Brent crude, the international benchmark, rose 4.9% to $107.51.

This helped energy stocks in the S&P 500 gain 1.4%, the largest gain among the 11 sectors that make up the index. ExxonMobil rose 2.1% and ConocoPhillips rose 1.1%.

Associated Press reporter Elaine Kurtenbach contributed to the report.

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