Stocks finished a bumpy session in the red on Wednesday, as investors digested the latest consumer price data. While the statistics pointed to slowing price increases overall, investors worried about the general prospects for the economy.
The Nasdaq Composite (COMP.IND) closed -0.9%, the S&P 500 (SP500) ended -0.4% and the Dow (DJI) finished -0.1%.
The Nasdaq led the major averages lower, falling 102.54 points to close at 11,929.34. The Dow Jones slipped 38.29 points to finish at 33,646.50 and the S&P 500 declined 16.99 points to end at 4,091.95.
Seven of the 11 S&P sectors finished lower, paced by a 1.5% drop in Consumer Discretionary. Communication Services and Info Tech posted modest declines. On the other side of the spectrum, Industrials and Energy edged out thin gains.
“Even though the stock market started off in positive territory, it quickly turned to the red, driven by fears that economic conditions moving forward might worsen,” market expert Daniel Jones told Seeking Alpha.
Jones added: “It seems that once the data was digested, the negative came out. This negative revolves around the idea that a decline in prices that is too rapid could cause a hard landing for the economy as opposed to the soft landing that the Federal Reserve is pushing for.”
The government revealed that consumer prices climbed 5% in March compared to last year, slowing from an annual pace of 6% seen in February. The result also came in below the figure predicted by economists. However, core CPI, which excludes volatile food and energy prices, matched projections with a 5.6% annual increase.
The inflation report initially prompted a wave of buying, but investors lost conviction early in the day. Stocks meandered through a choppy session from there, with the major U.S. equity averages eventually ending in negative territory.
The bond market reacted to the inflation data with buying, sending yields lower. The 10-year yield (US10Y) retreated 2 basis points to 3.42%, while the more rate-sensitive 2-year yield (US2Y) declined 8 basis points to 3.98%.
Looking at individual stocks, American Airlines (AAL) dropped after releasing disappointing profit guidance, news that weighed on the overall airline sector.