NEW YORK, May 12 — US stocks hit a one-month low yesterday as speculation that rising inflation pressure could prompt interest rate hikes sooner rather than later dragged on shares and hobbled the dollar, which hovered near a 2-1/2-month low.
Technology stocks were among the biggest losers, mirroring a sell-off in China, where talk of tighter regulation sent technology shares skidding.
But US shares clawed back some of their losses over the course of the day, with the tech-focused Nasdaq Composite reversing the bulk of its early 2 per cent decline.
Investors said the snap back in shares suggested that inflation concerns were not quite so entrenched yet, despite rising commodity prices and labour shortages in the United States. They said the sheer volume of money sloshing around in financial markets also meant some individuals are always looking to invest their cash on pull-backs.
“Welcome to a lot of money,” said Paul Nolte, a portfolio manager at Kingsview Investment Management, which oversees US$2 billion (RM 8.2 billion). “The worry is maybe inflation is something more than transitory, but it looks like this is a mood swing for now rather than a longer-term concern.”
The Nasdaq Composite ended little changed, while the Dow Jones Industrial Average dropped 1.4 per cent. The S&P 500 fell 0.9 per cent, off a one-month low struck earlier yesterday.
Bets that inflation could accelerate in the coming months burst to the fore on Monday when the breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) — a measure of inflation expectations — jumped to a decade-high 2.717 per cent. It traded at 2.695 per cent by late yesterday.
The 10-year TIPS breakeven rate stood at 2.539 per cent, indicating that the market sees inflation averaging 2.5 per cent a year for the next decade.
All eyes are now on the US consumer price index report to be released by the US Labour Department today. Until then, some investors appeared to be buying on dips.
The dollar, which slipped to a 10-week low yesterday on concerns that mounting price pressures could erode its value, also narrowed some of its earlier losses.
The dollar index, which measures the greenback against six major currencies, was little changed at 90.188, after touching a low of 89.979.
The currencies of major natural resource suppliers such as Canada held ground amid rising commodity prices. The loonie was little changed at C$1.2097 after hitting a 3-1/2-year high of C$1.2078.
The Australian dollar, another proxy for commodity prices, was steady at US$0.7839, but off a 10-week high of US$0.7891 struck on Monday.
Gold also recouped early declines, as a softer dollar offset losses generated by rising US Treasury yields. Spot gold edged up 0.11 per cent to US$1,837.39 per ounce, after dropping as much as 1 per cent earlier.
In keeping with market worries about a pick-up in inflation, the yield on benchmark 10-year Treasuries edged up to 1.6235 per cent, though off a high of 1.6310 per cent.
The spread between benchmark two — and 10-year Treasuries also widened slightly to 146 basis points, up more than 1 basis point from the previous day.
Oil prices were not spared of the day’s volatility, and had reversed all early losses by the end of yesterday’s session, lifted by fears of a gasoline shortage after a cyber attack caused an outage at the largest US fuel pipeline system.
US crude gained 0.8 per cent to US$65.44 a barrel. Brent crude added 0.5 per cent to US$68.69 per barrel.
In cryptocurrencies, ether dipped from record levels hit on Monday, but was nevertheless up 3.7 per cent at US$4,101.15. The value of the second-biggest digital token has surged over 5.5 times so far this year. — Reuters
