Market Snapshot: Dow falls over 325 points, stocks slide as investors await inflation data and oil tops $120 a barrel

United States

U.S. stocks traded sharply lower Wednesday afternoon, as investors awaited inflation data due at the end of the week and oil prices jumped to a 3-month high.

What are major indexes doing?
  • The Dow Jones Industrial Average  DJIA, -0.75% lost 337 points, or 1% to 33,844.
  • The S&P 500  SPX, -0.94% declined 50 points, or 1.2%, to 4,110.
  • The Nasdaq Composite  COMP, -0.64% was off 107 points, or 0.9%, at 12,069.

On Tuesday, major indexes rose solidly, posting back-to-back gains.

What’s driving markets?

Trading volume remains low as investors look ahead to Friday’s consumer price data for May, while a follow-up to Tuesday’s gains could be a tough order for U.S. stocks, with oil prices rising.

“Volume is equivalent to conviction — and we don’t have volume,” said Kent Engelke, chief economic strategist at Capitol Securities Management, by phone.

He pointed to market jitters around the Federal Reserve’s plans to tighten monetary policy, liquidity concerns, and recent economic warnings from a several major U.S. banks as keeping a damper on sentiment, likely at least until Friday’s monthly reading on inflation.

“We are kind of sitting on our hands,” Engelke said, noting that most subsectors of the S&P 500 index were losing ground Wednesday. While the energy sector lost its grip on earlier gains, the communication services component was still up 0.1%, according to FactSet.

“What we’re really going to be looking at is what does the month over month figure look like for CPI, on the core measurements? And does that look like it is starting to come down? In other words, have we gotten peak inflation is the question everybody’s really wants answered on Friday,” Scott Ladner, chief executive at Infrastructure Capital Management said in a phone interview.

Read: This hedge-fund manager called inflation early. He now says consumer prices will finish 2022 at a level that ‘screams failure by the Fed’

The Organization for Economic Cooperation and Development cut its global economic growth forecast for this year to 3% from 4.5%, and predicted growth would slow to 2.8% in 2023, as it cited “a new set of adverse shocks” from Russia’s invasion of Ukraine and China’s COVID-related lockdowns.

The OECD’s forecast is close to the 2.9% growth the World Bank predicted for this year on Tuesday.

“The unmistakable contrast between downbeat global growth assessments and central banks’ monetary-tightening push could be a significant headache for stock pickers,” said Stephen Innes, managing partner at SPI Asset Management.

Read: Inflation is coming for middle-class households as higher prices hit big-box stores. Will they cut back on discretionary purchases?

“With monetary policy feeding lower growth expectations, there is an elevated level of negative circulation here. Central banks continue to surprise to the hawkish side with no end in sight until inflation moves convincingly toward its target,” said Innes. “And while those tighter financial conditions are the obvious path toward lower inflation, they are also analogous to lower asset prices.”

The Central Bank of India followed up Tuesday’s bigger-than-expected hike in interest rates from the Reserve Bank of Australia, with an increase in its repo rate to curb rising inflation. The European Central Bank will meet Thursday, but is expected by some to hold off any hike until July.

U.S. crude oil prices CL.1, +2.50% jumped 2.3% to settle at $ 122.11 a barrel after ending Tuesday at a nearly three-month high, extending gains after government data showed an unexpected rise in U.S. crude inventories, as well as an unexpected drop in gasoline stocks.

Key Words: Oil prices could go ‘parabolic’, putting global economy in ‘critical situation,’ says Trafigura chief

The yield on the 10-year Treasury note BX:TMUBMUSD10Y rose 6basis points to 3.03%.

Read: Here’s why the stock market gets ‘squirrelly’ when bond yields rise above 3%

What companies are in focus?
  • Altria Group Inc.  MO, -7.24% shares fell 7%, after Morgan Stanley analyst Pamela Kaufman turned bearish on the cigarette and heated tobacco seller, citing inflation pressures and long-term competitive risks. 
  • Twitter Inc.  TWTR, +0.82% shares rose 0.9% after a report outlined its plans to share a full data stream with Tesla Inc. TSLA, +1.47%  chief Elon Musk as it looks to secure a closing of their pending merger arrangement, The Washington Post said Wednesday. 
  • Shares of Walmart Inc. WMT, -0.56% were 0.8% lower after Rob Walton, heir to the big-box retailer, won a bid for the NFL’s Denver Broncos franchise for $ 4.6 billion, the most ever paid for a franchise in the sport’s history, according to ESPN.
  • Novavax Inc. NVAX, +7.35% shares rose 8.8%, after an advisory committee to the U.S. Food and Drug Administration recommended its COVID-19 vaccine.
  • Shares of U.S.-listed Chinese tech names were rising, with stock in AlibabaGroup Holding Ltd. BABA, +15.61% up nearly 14.5%, Pinduouo Inc. PDD, +11.88% up 9.8%, Tencent Music Entertainment Group TME, +5.49% rising 5.3% and Bilibli Inc. BILI, +7.55% gaining 6% on signs of easing regulatory pressure after China’s regulatory body approved a number of videogame titles.
How are other assets trading?
  • The ICE U.S. Dollar Index DXY, +0.21% was up 0.2%.
  • Gold futures GC00, +0.20% rose 0.2% to settle at $ 1,856.50 an ounce.
  • Bitcoin BTCUSD, -3.89% was down 2.2% at $ 30,365.
  • In European equities, the Stoxx Europe 600 index SXXP, -0.57% fell 0.6% and the FTSE 100 index UKX, -0.08% dropped 0.1%
  • In Asia, the Shanghai Composite SHCOMP, +0.68% rose 0.7%, Hong Kong’s Hang Seng Index HSI, +2.24% jumped 2.2%, and the Nikkei 225 index NIK, +1.04% rose 1%

—Barbara Kollmeyer contributed reporting to this article.