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While you were sleeping: Inflation concern, tech worries weigh on Wall St

Friday 20th April 2018

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US stocks and Treasuries dropped on concern rising commodity prices, as the Trump administration’s protectionist moves raised the spectre of a global trade war, will boost inflation and interest rates. 

“This is a key risk,” Weeden analyst Michael Purves wrote in a note to investors Thursday, according to Bloomberg. “Higher rates and inflation without higher economic growth raises the discount rate for equity cash flows (lower P/E) but also raises stagflation risks for the economy and the stock market.”

In 2.16pm trading in New York, the Dow Jones Industrial Average shed 0.6 percent, while the Nasdaq Composite Index dropped 0.9 percent. In 2.01pm trading, the Standard & Poor’s 500 Index slid 0.8 percent.

US Treasuries dropped, lifting yields on the 10-year note four basis points higher to 2.92 percent, the highest in eight weeks, according to Bloomberg. 

Some expect that the Federal Reserve, which has so far raised its key rate once this year and has flagged plans for at least two more, might steepen its hike path. 

”The fact is with this fourth rate hike looming, this is the second day this week we’ve seen bonds get hit pretty good, so now it has everybody nervous for the economy if rates do go higher, what does it mean for the overall economy outside financials?” Joe Kinahan, the chief market strategist at TD Ameritrade, told Bloomberg.

“The world’s been afraid of a bogeyman so to speak. The bogeyman has been higher rates and it’s not stopping,” according to Kinahan.

Also weighing on Wall Street were slides in tech stocks including Apple and Nvidia amid a downbeat outlook from Taiwan Semiconductor Manufacturing. 

“Moving into second quarter 2018, continued weak demand from our mobile sector will negatively impact our business despite strength in cryptocurrency mining," Lora Ho, chief financial officer of TSMC, said in a statement.

The Dow fell as declines in shares of Procter & Gamble and those of Intel, recently down 3.2 percent and 2.6 percent respectively, outweighed advances in shares of American Express and those of JPMorgan Chase, recently up 6.7 percent and 1.9 percent respectively.

Shares of Apple traded 2.8 percent weaker as of 2.23 in New York, while those of Nvidia traded 3.9 percent lower.

“The broader tech weakness that you’re seeing is out of out weak guidance that’s impacting Apple and the semiconductor space,” Michael Hans, chief investment officer at New York City-based Clarfeld Financial Advisors, told Reuters.

Shares of American Express rallied on a better-than-expected increase in quarterly profit and an upbeat full-year outlook. 

“Today’s results are showing good returns on the investments we’ve been making to drive growth in the premium sector, with cobrand partners, in our merchant network and with small and mid-sized businesses,"  Stephen Squeri, chief executive officer of American Express, said in a statement. 

In Europe, the Stoxx 600 Index ended the day little changed from the previous close. The UK’s FTSE 100 Index rose 0.2 percent, as did France’s CAC40 Index.

Germany’s DAX Index fell 0.2 percent.

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