Inflation Report Hits Markets Hard

An eye-opening report on inflation that was hotter than expected slammed into the bond market on Wednesday, sending yields jumping, and helping knock stocks lower, the AP reports. The sharpest inflation since 1990 forced investors to boost bets that the Federal Reserve will have to raise short-term interest rates more quickly off their record low. That in turn sent Treasury yields to their biggest gain in months. Higher yields tend to hurt expensive and high-growth stocks, and the S&P 500 fell 0.8%. Gold and Bitcoin both rose amid the inflation worries. The yield on the 10-year Treasury note rose to 1.56% from 1.43% late Tuesday. The S&P 500 fell 38.54 points to 4,646.71. The Dow Jones Industrial Average fell 240.04 points, or 0.7%, to 36,079.94. The Nasdaq fell 263.84 points, or 1.7%, to 15,622.71.

Rising yields tend to be a drag on stocks, particularly those seen as the most expensive or whose expectations for big profit growth is furthest in the future. Energy stocks slid following a decline in the price of crude oil. Gold and Bitcoin both rose amid the inflation worries, but the center of Wall Street's action was in the bond market. Pushed by the inflation report, investors are now pricing in a 64% chance that the Fed will raise rates at least once by June. A day earlier, that probability was at 51%.

Drops for some high-growth and tech stocks were weighing on the market, including declines for Apple, Microsoft, Nvidia, Facebook’s parent company, and Google's parent company. But more than one out of three stocks in the S&P 500 was nevertheless rising, with gains for health care stocks and others helping to limit losses for the market. Pfizer rose 3.7%. Rivian Automotive, an electric truck maker backed by Amazon and Ford, glided 29% higher in its first day of trading. DoorDash rose 11.6% after reporting stronger-than-expected revenue for its latest quarter and announcing that it is buying Finnish delivery service Wolt Enterprises, expanding its reach into Europe and other markets.

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