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Stocks Tumble as a Plunge in Tech Stocks Weighs on the Overall Market

Barchart - Wed May 11, 3:44PM CDT
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What you need to know…

The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -1.65%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.02%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -3.06%.

U.S. stock indexes Wednesday closed sharply lower.  The S&P 500 dropped to a 13-1/2 month low, the Dow Jones Industrials fell to a 14-month low, and the Nasdaq 100 plunged to a 17-1/2 month low.

A sell-off in technology stocks Wednesday led the overall market lower after U.S. CPI data for April signaled that inflation pressures remain stubbornly high.  Stocks sank to their lows Wednesday afternoon when Atlanta Fed President Bostic said he is open to "moving more" on interest rates if price growth continues at the current high pace.

Stocks were also weighed down Wednesday after Morgan Stanley said the rout in stocks isn’t over yet, and “we continue to believe that the U.S. equity market is not priced for this slowdown in growth from current levels.” 

Energy stocks were a bright spot for the market Wednesday as they moved higher on the heels of a +5% jump in crude oil prices.  Stocks also had carry-over support from a rally Wednesday in Chinese stocks in hopes that pandemic restrictions in China will soon be lifted after China reported a sharp decline in new Covid infections.

U.S. Apr CPI rose +0.3% m/m and +8.3% y/y, stronger than expectations of +0.2% m/m and +8.1% y/y.  Apr CPI ex-food & energy rose +0.6% m/m and +6.2% y/y, stronger than expectations of +0.4% m/m and +6.0% y/y.  On the brighter side, both the headline and core CPIs at least fell back from March’s 40-year highs of +8.5% y/y and +6.5% y/y, respectively.

Today’s stock movers…

Weakness in technology stocks Wednesday led the overall market lower. Crowdstrike Holdings (CRWD) and Zscaler (ZS)  closed down by more than -9%.  Also,  Okta (OKTA), Atlassian Corp (TEAM), and Splunk (SPLK) close down by more than -7%.  In addition, Apple (AAPL) closed down more than -5% to lead losers in the Dow Jones Industrials, and Nvidia (NVDA) also closed down more than -5%.

Dish Network (DISH) closed down more than -19% Wednesday to lead losers in the S&P 500 after Truist Securities lowered its price target on the stock to $25 from $32. 

Lucid Group (LCID) closed down -13% to lead losers in the Nasdaq 100 as electric vehicle makers sold off after Lucid CEO Rawlinson said China’s lockdowns are impacting chip supply.  Also, Rivian Automotive (RIVN) closed down by more than -12%, and Tesla (TSLA) closed down by more than -8%. 

Energy stocks and energy service providers moved higher Wednesday after crude prices climbed more than +5% after China reported a decline in Covid infections.  Baker Hughes (BKR) closed up more than +5%.  Also, Hess Corp (HES) and Marathon Oil (MRO) closed up more than +3%,  In addition, APA Corp (APA) closed up more than +2%, and Exxon Mobil (XOM), Phillips 66 (CVX), Devon Energy (DVN), Occidental Petroleum (OXY), and Chevron (CVX) closed up more than +1%. 

Electronic Arts (EA) closed up more than +7% Wednesday to lead gainers in the S&P 500 and Nasdaq 100 after MoffettNathanson LLC upgraded the stock to buy from neutral with a price target of $141.

Across the markets…

June 10-year T-notes (ZNM22) on Wednesday closed up by +15.5 ticks, and the 10-year T-note yield fell -7.2 bp to 2.919%.  June T-notes Wednesday climbed to a 1-1/2 week high, and the 10-year T-note yield fell to a 1-week low of 2.905%.  T-notes recovered from early losses and moved higher on increased safe-haven demand after stocks tumbled.  T-notes Wednesday morning initially moved lower after U.S. Apr CPI rose more than expected.  Also, supply pressures weighed on T-notes as the Treasury on Wednesday auctioned $36 billion of 10-year T-notes.