Stocks reverse earlier gains to close lower with inflation data in focus

U.S. stocks pared gains and fell in the final hour of trading Tuesday to close a second straight session in the red as investors assessed fresh inflation data out of Washington that showed prices in March further accelerated to a new 40-year high.

The S&P 500 retreated to fall 0.3%, and the Dow Jones Industrial Average gave up an intraday climb to cap trading roughly 90 points lower. The Nasdaq Composite faltered after an earlier advance, declining 0.3%. Meanwhile, Treasury yields slightly retreated, but the benchmark 10-year yield remained above 2.7%, the highest level since January 2019.

The moves follow an earlier bounce in stocks after some key elements in the Tuesday’s read on the Consumer Price Index (CPI) came in less severe than anticipated, with the core figure coming in close to consensus numbers.

“While today’s inflation print hit a four-decade high, there was a sigh of relief as some components of core inflation weakened,” Allianz Investment Management senior investment strategist Charlie Ripley said in a note.

Investors were focused on the latest gauge on inflation in the U.S. in Tuesday’s session. The Bureau of Labor Statistics’ (BLS) CPI index rose 8.5% in March compared to the same month last year, according to the latest report released Tuesday. The figure marks the fastest rise since December 1981 and follows a 7.9% annual increase in February. Heading into the report, consensus economists were looking for an 8.4% jump for March, according to Bloomberg data.

“Regarding peak inflation, we have been at this juncture before where subtle shifts within the data make it appear that the level of inflation has reached its peak for the cycle only to keep marching higher,” Ripley said. “Going forward, the greater concern is really around how entrenched inflation has become as Americans continue to worry about rising prices.”

The red-hot print comes as investors grapple with the likelihood Fed officials will act more aggressively to combat inflation after a hawkish readout of minutes last week from the central bank’s March meeting suggested “many” policymakers “would have preferred a 50 basis point increase” in benchmark interest rates last month.

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“Investors are laser focused on what the Federal Reserve is going to do in its upcoming meetings and it’s looking like 50 basis point hikes are more and more likely,” Commonwealth Financial Network head of investment management Bill Price said in a reaction to the CPI print. “The market seems to be discounting 50 basis point hikes and several members of the Fed have been pretty vocal about their desire to curb inflation.”

Although investors are largely prepared for the likelihood Fed policymakers will be more combative in their inflation-fighting efforts, worries have emerged that a ramp up in monetary tightening may cause an economic contraction.

Strategists have begun to discuss the possibility of a recession more widely in recent weeks, notably with economists at Deutsche Bank recently warning central bank measures could materially slow growth in the second half of 2023.

Some have said it’s too early to make such a call but that the possibility is on the table.

“I would say that it’s probably closer to a coin toss that the economy will be moving into recession by the end of the year,” said Dreyfus and Mellon Chief economist and macro strategist Vince Reinhart on Yahoo Finance Live.

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4:00 p.m. ET: Stocks close lower following U-turn from earlier advances

Here’s how the main indexes fared at the end of Tuesday’s trading session:

• S&P 500 (^GSPC): -15.18 (-0.34%) to 4,397.35

• Dow (^DJI): -88.19 (-0.26%) to 34,219.89

• Nasdaq (^IXIC): -40.38 (-0.30%) to 13,371.57

• Crude (CL=F): +$6.23 (+6.61%) to $100.52 a barrel

• Gold (GC=F): +$23.90 (+1.23%) to $1,972.10 per ounce

• 10-year Treasury (^TNX): -5.5 bps to yield 2.7250%

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12:39 p.m. ET: JPMorgan shares are down nearly 16% year-to-date

JPMorgan is the first mega-bank to unveil first quarter results Wednesday as it kicks off the earnings season. Analysts estimate the company will report earnings per share (EPS) of $2.72, according to Bloomberg consensus estimates.

Financials have lagged the broader market meaningfully year-to-date amid concerns over U.S. bank ties to Russia and worries of an economic slowdown. In his recent annual letter to shareholders, JPMorgan CEO Jamie Dimon warned the bank is positioned to lose as much as $1 billion over time as a result of the war.

Although the major bank said it is not worried about its direct exposure to Russia, the institution is concerned about the “secondary and collateral effects” the crisis and sanctions pose on so many companies and countries.

Shares of JPMorgan were down slightly in intraday trading by 0.3% to $132.64 a piece as of 12:37 p.m. ET. The stock is down 15.8% year-to-date.

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12:18 p.m. ET: Lululemon climbs after expansion of trade-in and resell program

Shares of athletic apparel retailer Lululemon (LULU) rose as much as 6% to the highest intraday level since Jan. 3 following an announcement the company will broaden its trade-in and resell program “Lululemon Like New” nationwide.

Lululemon Like New will be available to customers across the U.S. starting on Earth Day, April 22 after a successful two-state pilot in 2021. The retailer will reinvest 100% of profits to support its Impact Agenda, including making 100% of products with sustainable materials and end-of-use solutions by 2030.

LULU was up 4.4% to $384.80 per share as of 12:14 p.m. ET, likely boosted by an up date in the broader markets after CPI data came in less severe than anticipated, with the core figure coming in just below the consensus numbers.

The S&P 1500 Consumer Discretionary Index rose as much as 2.4%.

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9:30 a.m. ET: Stocks push forward despite report showing red-hot inflation in March

Here were the main moves in markets during Tuesday’s opening bell:

• S&P 500 (^GSPC): +28.07 (+0.64%) to 4,440.60

• Dow (^DJI): +100.67 (+0.29%) to 34,408.75

• Nasdaq (^IXIC): +162.91 (+1.21%) to 13,574.87

• Crude (CL=F): +$4.36 (+4.62%) to $98.65 a barrel

• Gold (GC=F): +$25.20 (+1.29%) to $1,973.40 per ounce

• 10-year Treasury (^TNX): -6.1 bps to yield 2.7190%

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8:35 a.m. ET: March CPI climbed more-than-expected 8.5% over last year

U.S. consumers paid more for a variety of goods and services in March compared to the prior month as price levels across the economy continued to accelerate amid persisting supply and demand disruptions.

The Bureau of Labor Statistics’ (BLS) Consumer Price Index (CPI) rose 8.5% in March compared to the same month last year, according to the latest report released Tuesday. That marked the fastest rise since December 1981. This followed a 7.9% annual increase in February. Heading into the report, consensus economists were looking for an 8.4% jump for March, according to Bloomberg data.

With definitive signs of a peak yet to be seen in inflation, members of the Federal Reserve have escalated their rhetoric on using monetary policy tools to bring down fast-rising prices. Last week, Fed Governor Lael Brainard said that bringing down inflation was “our most important task,” while San Francisco Fed President Mary Daly said that high inflation was “as harmful as not having a job.“

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7:10 a.m. ET: Contracts on S&P 500, Dow, and Nasdaq flat as investors await CPI print

Here’s how the main indexes fared in futures trading ahead of Tuesday’s opening bell:

• S&P 500 futures (ES=F): +1.25 points (+0.03%) to 4,410.25

• Dow futures (YM=F): -1.00 points (-0.00%) to 34,218.00

• Nasdaq futures (NQ=F): +14.25 points (+0.10%) to 14,014.25

• Crude (CL=F): +$3.81 (+4.04%) to $98.10 a barrel

• Gold (GC=F): +$10.30 (+0.53%) to $1,958.50 per ounce

• 10-year Treasury (^TNX): +0.00 bps to yield 2.7800%

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6:40 a.m. ET: US small business sentiment falls as inflation worries rise

Confidence levels among small business owners across the country further waned in March, and a higher number of mom-and pop-shop operators reported inflation as their single most important concern, a survey out Tuesday showed.

The National Federation of Independent Business said its Small Business Optimism Index dropped 2.4 points to 93.2 last month to mark the third straight month of readings below the 48-year average of 98. The index has declined every month this year so far.

Of respondents, 31% identified inflation as their single most important problem, up 5 points from February’s survey. The figure is the largest share of participants citing inflation as their biggest concern since the first quarter of 1981, also replacing worries about “labor quality” as the number one problem confronting small businesses.

High inflation caused by shortages, massive fiscal stimulus and low interest rates have pressured the economy in recent months.

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6:10 p.m. ET Monday: Stock futures little change ahead of Tuesday’s inflation data

Here’s where markets were trading ahead of the overnight session on Monday:

• S&P 500 futures (ES=F): +2.75 points (+0.06%) to 4,411.75

• Dow futures (YM=F): +29.00 points (+0.08%) to 34,248.00

• Nasdaq futures (NQ=F): +9.75 points (+0.07%) to 14,009.75

• Crude (CL=F): +$0.97 (+1.03%) to $95.26 a barrel

• Gold (GC=F): +$9.30 (+0.48%) to $1,957.50 per ounce

• 10-year Treasury (^TNX): +6.7 bps to yield 2.7800%

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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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