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Market Snapshot: Dow futures add to losses after inflation climbs to highest in 13 years

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U.S. stock-index futures added to early weakness Wednesday morning, after a reading on inflation for the year to April climbed 4.2%, marking the highest reading in about 13 years, reigniting fears that the Federal Reserve may need to dial back its easy money policies earlier than expected.

Trading on Wednesday comes after the Dow Jones Industrial Average suffered its biggest one-day fall since late February.

What are major indexes doing?
  • Futures on the Dow Jones Industrial Average
    YM00,
    -0.43%

    were down 126 points, or 0.4%, at 34,058.
  • S&P 500 futures
    ES00,
    -0.78%

    fell 28.45 points, or 0.7%, to 4,116.25.
  • Nasdaq-100 futures
    NQ00,
    -1.53%

    dropped 193.25 points, or 1.5%, to 13145.50.

On Tuesday, the Nasdaq Composite
COMP,
-1.28%

bounced back from an intraday fall of more than 2% to end slightly lower as tech shares bounced back from an initial rout. But the broader market struggled to recover, with the Dow
DJIA,
-0.39%

finishing 473.66 points lower, down 1.4%, for its biggest one-day percentage drop since Feb. 26. The S&P 500
SPX,
-0.67%

lost 0.9%.

What’s driving the market?

Inflation jitters were percolating again after a report showed that inflation in in the year to April rose at its fastest pace in about 13 years, amid the recovery from the COVID pandemic, data from the Labor Department showed.

The consumer-price index rose 4.2% from a year ago, compared with average economists estimates surveyed by Econoday for a 3.6% increase. The month-over-month rise was 0.8%, versus a forecast for a rise of 0.2%.

Overall, the rise was showed the fastest rate of climb since September 2008.

Excluding volatile food and energy prices, the core reading increased 3% from the same period in 2020, compared with expectations for 2.3% for the year.

“While the surge in inflation over the past year was driven in part by base effects, given last year’s economic lockdowns, we are seeing prices rise for all sorts of things, like lumber, auto parts, semiconductors, groceries and gasoline,” wrote Nancy Davis, founder of Quadratic Capital Management and manager of the Quadratic Interest Rate Volatility and Inflation Hedge exchange-traded fund
IVOL,
.

“I expect inflation data to remain elevated over the coming months, given the widespread reopening of the economy, shortages or delays in many manufactured goods and a dovish Federal Reserve that is willing to let inflation run above its 2% target,” she said.

Some analysts speculate that the negative market reaction will be short-lived as the Fed continues to play down the pickup in inflation, referring to it as transitory.

Federal Reserve Vice Chairman Richard Clarida is due to deliver a speech at 9 a.m.

Which companies are in focus?
  • Shares of Electronic Arts Inc.
    EA,
    +0.50%

    were up 0.6% in premarket trade after the videogame publisher late Tuesday reported its quarterly results.
  • Lemonade Inc.
    LMND,
    +3.93%

    shares were down more than 6% after the mobile-based insurance company beat on results but provided a lackluster outlook for the current quarter.
  • Europe’s second-highest court on Wednesday annulled a European Commission ruling that ordered online retailer Amazon.com Inc.
    AMZN,
    +1.05%

    to pay €250 million ($303.3 million) to Luxembourg, as part of an attempt to crack down on unfair tax breaks extended to big multinationals by European Union member states. Shares were down 0.3%.
  • Shares of FuboTV Inc.
    FUBO,
    +8.07%

    jumped 20% in premarket action, after the company boosted guidance and reported first-quarter results.
How are other assets faring?
  • The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, was up at 1.65%, from 1.623%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.5%, jumping after the CPI reading.
  • Oil futures traded higher, with the U.S. benchmark CL00 advancing 1.3% higher at $66.14 a barrel on the New York Mercantile Exchange Gold futures GC00 edged lower, down less than 0.1% at $1,834.30 an ounce.
  • European equities fell sharply, with the Stoxx Europe 600 SXXP up 0.3% and London’s FTSE 100 UKXpicking up 0.7%.
  • Hong Kong’s Hang Seng Index HSI closed 0.8% higher, while the Shanghai Composite SHCOMP climbed 0.6% and Japan’s Nikkei 225 NIK sank 1.6%.

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