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US Stocks Move Lower on Inflation      05/11 16:07

   Banks and energy companies led a broad pullback for stocks Tuesday, knocking 
the Dow Jones Industrial Average more than 470 points lower and wiping out the 
market's gains from last week.

   (AP) -- Banks and energy companies led a broad pullback for stocks Tuesday, 
knocking the Dow Jones Industrial Average more than 470 points lower and wiping 
out the market's gains from last week.

   The S&P 500 lost 0.9%. That, plus its losses Monday, outweigh the benchmark 
index's gains last week. The Dow sank 1.4%, its worst day since Feb. 26. 
Treasury yields mostly edged higher.

   he market's downturn so far this week reflects growing worries among 
investors that inflation is rising. Any significant acceleration of inflation 
would be a drag on the overall market and could crimp the broader economic 
recovery. The selling comes ahead of a key measure of inflation at the consumer 
level due to be released by the government Wednesday.

   Commodity prices have been rising, particularly for industrial metals such 
as copper and platinum, as well as for energy commodities like gasoline and 
crude oil. Tech stocks, which get most of their valuation from the future 
profits those companies are expected to earn, become less valuable if inflation 
decreases the value of those earnings.

   Big technology companies were among the biggest decliners for a second 
straight day. Still, financial and energy companies, the best-performing 
sectors of the S&P 500 so far this year, fell the most. These sectors, in 
addition to industrials, have been favorites of investors betting that the 
economy will continue to recover from the pandemic. It's not uncommon for the 
stocks that have notched the biggest gains over time to fall sharply when 
investors turn cautious.

   "Yesterday, people were just watching to see what's causing the market to 
move downward," said Sam Stovall, chief investment strategist at CFRA. "Today 
the question is, ?gee, maybe this could be more than I was expecting it to be,' 
so investors are saying ?let me take profits while I can.'"

   The S&P 500 index lost 36.33 points to 4,152.19. The Dow fell 473.66 points 
to 34,269.16. The blue chip index hit an all-time high on Friday for the third 
straight day. The Nasdaq lost 12.43 points, or 0.1%, to 13,389.43.

   Small company stocks also gave up some ground. The Russell 2000 index fell 
5.71 points, or 0.3%, to 2,206.99.

   Inflation has been a concern for investors since bond yields spiked earlier 
this year, though yields have mostly stabilized since then. The yield on the 
10-year Treasury was steady at 1.61%. Despite reassurances from the Federal 
Reserve and a much weaker-than-expected U.S. jobs reading last week, investors 
have refocused on the potential for surging prices to pressure central banks 
into tapering off on their massive stimulus and ultra-low interest rates, 
analysts said.

   The market is going through a period of "digestion" as the economy recovers 
and is due for some consolidation following a strong run, said Sunitha Thomas, 
national portfolio advisor at Northern Trust Wealth Management. Rising 
inflation isn't unusual given the strong economic recovery along with a surge 
in company earnings, she said.

   Rising inflation in commodities has begun to push prices for some consumer 
products higher. Still, analysts expect increases to be mild and tied to the 
growing economy, even as the jobs market lags behind. Consumer confidence and 
retail sales are regaining ground as people get vaccinated and businesses 
reopen.

   Signals of inflation have popped up in other markets. China reported its 
strongest increase in producer prices since October 2017 last month, as supply 
constraints cascaded into manufacturing.

   Meanwhile, the most recent round of corporate earnings reports showed a 
broad recovery touching many different sectors and industries during the the 
first three months of the year. Much of that was anticipated ahead of the 
reports and investors are now far off from the next big round of results.

 
 
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