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Wall Street retreats as leading economic data flares inflation concerns

bear market

US stocks finished lower as the January Producer Price Index (PPI) came as hotter than expected while the jobless claims were less than expected for the last week, flaring concerns about sticky inflation following the unpleasant CPI data earlier this week. The US PPI rose 0.7% sequentially and 6% year on year, greater than an estimated 0.4% and 5.4%, respectively. Tesla’s slump amid a recall of more than 300,000 EVs also dragged on the tech sector, sending Nasdaq down. The US bond yields rose for the third straight day, with the US 10-year bond yield hitting the highest since 3 January, strengthening the US dollar further and pressuring commodity prices. Sentiment gets sour following a slew of worrisome economic data, with the VIX jumping 11% to above 20.

Asian markets are set for a mixed open, with the ASX 200 futures down 0.25%, Nikkei 225 down 0.58%, and Hang Seng Index up 0.15%.

Click to enlarge the table

  • All the 11 sectors in the S&P 500 finished lower, with Consumer Discretionary leading losses, down 2.2%. The other two growth sectors, including Technology and Communication Services, also underperformed, down 1.8% and 1.6%, respectively. All the major tech shares were down between 1-5%.
  • Tesla’s shares fell more than 5% due to a recall of 362,758 electric vehicles as the self-driving Beta software may cause crashes. The company also dismissed more than 30 employees from its Autopilot unit at a Buffalo plant regarding union activity The EV maker’s shares doubled from their January lows of close to 100 and CEO Elon Musk upgraded his production ambition to 2 million cars in 2023 following the fourth quarter earnings report.
  • Microsoft’s Chatbot gets critics as Bing AI delivers inaccurate and weird answers. Though the new artificial intelligence search engine that was powered by OpenAI has obtained over a million users last week, the news, however, sent Microsoft’s shares down 2.7% and dragged on Alphabet.  
  • Gold futures stabilized above near-term support of 1,829, despite a strengthened USD as risk-off sentiment may have supported haven assets’ strength. However, gold may face further downward pressure amid the recent jump in the US dollar bond yields.
  • Crude oil prices were also lower due to risk-off trades following the selloff on Wall Street following the PPI data and a strong USD. The US crude inventory builds to a 17-month high, suggesting that demands are weakening.  

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