Stocks slumped Tuesday as big technology stocks continued on
a two-day slide. Inflation remains a growing concern among investors, which
would be a major drag on the overall market if allowed to accelerate.
The S&P 500 index fell 1%. The Dow Jones Industrial
Average fell 500 points, or 1.4%, and the technology-heavy Nasdaq Composite was
down 0.5%.
Big technology companies were dragging down the market in
the early going. Apple fell 1.5%, extending its loss from the day before.
Facebook, Cisco Systems, Microsoft and Google were also all down roughly 1% or
more.
Tech stocks have gotten hit in recent days as concerns about
inflation impact the overall stock market. Commodity prices have risen,
particularly for industrial metals such as copper and platinum, as well as for
energy commodities like gasoline and crude oil. Tech stocks, which get most of
their valuation from the future profits those companies are likely to earn,
become less valuable if inflation decreases the value of those earnings.
Inflation has been a concern for investors since bond yields
spiked earlier this year, but yields have mostly stabilized since then. The
yield on the 10-year Treasury was steady at 1.61%. Despite reassurances from
the Federal Reserve and a much weaker-than-expected U.S. jobs reading last
week, investors have refocused on the potential for surging prices to pressure
central banks into tapering off on their massive stimulus and ultra-low
interest rates, analysts said.
Rising commodity prices have begun to push prices of some
consumer products higher but analysts expect increases to be mild and tied to
the growing economy, even as the jobs market lags behind. Consumer confidence
and retail sales are regaining ground as people get vaccinated and businesses
reopen.
Signals of inflation have popped up in other markets. China
reported its strongest increase in producer prices since October 2017 last
month, as supply constraints cascaded into manufacturing.
Meanwhile, the most recent round of corporate earnings
reports showed a broad recovery touching many different sectors and industries
during the first three months of the year. Much of that was anticipated ahead
of the reports and investors are now far off from the next big round of results.
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