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Stock futures pointed lower on Wednesday, indicating Wall Street was bracing for a second day of declines, as the fear of rising inflation forced the Dow to its worst one-day decline since February, and amplified new concerns about the rebound from COVID-19.
With a weekend cyber-attack sharply driving up the cost of gas nationwide — while sparking shortages — investors are growing increasingly restive over inflation. Mounting signs of supply shortages in the face of surging demand threatening to spur a rapid rise in prices.
Those fears crystallized on Wednesday, after the government reported that headline consumer prices surged by a faster than expected 4.2% last month. Excluding food and energy, prices jumped 0.9 percent in April (SA) and are up 3.0 percent over the year.
The jitters have surfaced as the U.S. economic recovery — hammered by the COVID-19 pandemic — appears to be quickening. A report from the Labor Department on Tuesday showed job openings reached a record high in March, and a separate survey showed a record proportion of small business owners reported job postings that could not be filled last month.
A system-wide disruption following a cyberattack on a key energy pipeline operator has sent gasoline prices higher, accelerating an already upward-moving trend in energy prices as demand for travel and fuel resurges coming out of the COVID-19 pandemic.
“We are finding input shortages — whether it’s labor, or semiconductors, or raw materials – are slowing down production. Stocks are beginning to price this in. And tech, I call it noise, but really tech doesn’t require strong economic growth to perform, we know it’s more of a secular story,” Jeffrey Kleintop, chief global investment strategist at Charles Schwab, told Yahoo Finance. “So I think it’s moving past these trade winds that are blasting the rest of the market really focused on stagflation.”
Investors have in turn also been pondering when the Federal Reserve might step in and adjust its highly accommodative monetary policies to stave off rising inflation. Many policymakers, however, have remained staunchly of the view that the central bank needs to keep rates low and asset purchases carrying on at their current, aggressive rate to support the economy still emerging from a worldwide health crisis.
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