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Markets Now in 'Digestion' Period

Dow drops 473 points as inflation fears grow
By Newser Editors and Wire Services
Posted May 11, 2021 3:40 PM CDT

(Newser) – Stocks closed lower on Wall Street Tuesday, led by banks, industrial, and health care companies. Inflation remains a growing concern among investors, which would be a major drag on the overall market if it takes hold. 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%, or 473.66 points, its worst day since Feb. 26. Big technology companies were among the biggest decliners for a second straight day. 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. 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, the AP reports.

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Inflation has been a concern for investors since bond yields spiked earlier this year, though yields have mostly stabilized since then. Despite reassurances from the Federal Reserve and a much weaker-than-expected US 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, says 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 says.

(Read more stock market stories.)

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