Benchmarks closed in the red on Wednesday after the Labor Department reported that inflation accelerated at the fastest pace since 2008 in April. The news triggered a massive sell-off among technology stocks as investors reassessed their high valuations in the face of inflation. The Dow Jones Industrial Average (DJI) fell 681.76 points, or 2%, to close at 33,587.66 and the S&P 500 slipped 89.06 points, or 2.1%, to close at 4,063.04. The Nasdaq Composite Index closed at 13,031.68, shedding 357.75 points, or 2.7%. The fear-gauge CBOE Volatility Index (VIX) increased 26.3%, to close at 27.59. Declining issues outnumbered advancing ones for 6.05-to-1 ratio on the NYSE, while a 3.84-to-1 ratio on the Nasdaq favored decliners. How Did the Benchmarks Perform? On Wednesday, the Dow suffered its biggest one-day percentage decline since Jan 29, dropping 713 points at its session low. Most of the blue-chip index’s stocks ended in the red, with shares of Honeywell International Inc. ( HON Quick Quote HON - Free Report) and The Home Depot, Inc. ( HD Quick Quote HD - Free Report) closing more than 4% lower for the session. Both the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. With a 2.1% decline, the S&P 500 has its biggest drop since February. Of the 11 major sectors, only the energy sector closed in the green as it tends to do well in an inflationary environment. Occidental Petroleum Corporation ( OXY Quick Quote OXY - Free Report) was among the energy sector’s highest gainer adding 2.4% and other big names like Exxon Mobil Corporation ( XOM Quick Quote XOM - Free Report) and Chevron Corporation ( CVX Quick Quote CVX - Free Report) added at least 0.5% on Wednesday. High valuation tech stocks suffered the most pushing the Nasdaq into the negative territory, and the Technology Select Sector SPDR Fund (XLK) closed 2.8% lower. Shares of tech behemoths like Microsoft Corporation ( MSFT Quick Quote MSFT - Free Report) , Netflix, Inc. ( NFLX Quick Quote NFLX - Free Report) , Amazon.com, Inc. ( AMZN Quick Quote AMZN - Free Report) and Apple Inc. ( AAPL Quick Quote AAPL - Free Report) fell more than 2%, while Tesla, Inc. ( TSLA Quick Quote TSLA - Free Report) and Alphabet Inc. GOOGL closed 4.4% and 3.1% lower, respectively. The Nasdaq’s highest decliners were Applied Materials, Inc. ( AMAT Quick Quote AMAT - Free Report) and Marvell Technology, Inc. ( MRVL Quick Quote MRVL - Free Report) that dropped 7% and 6.1%, respectively. On Wednesday, the S&P 500 posted nine new 52-week highs and no new lows, while the Nasdaq Composite recorded 34 new highs and 118 new lows. A total of 11.82 billion shares were traded yesterday, higher than the last 20-session average of 10.44 billion. Hotter-than-expected Inflation Triggers Massive Selling The U.S. Bureau of Labor Statistics on Wednesday reported that the Consumer Price Index (CPI) rose 0.8% in April and 4.2% from a year earlier. The index which measures a basket of goods and includes energy and housing costs had a consensus estimate of a 0.2% rise. Inflation has accelerated at its fastest pace in nearly 13 years as the US economy moves in the path of recovery from the pandemic and prices have jumped higher-than-expected. Core CPI that excludes volatile food and energy prices has increased 0.9% in April, surpassing the consensus estimate of a 0.3% rise and is 3% higher than the same period last year. The monthly gain in core inflation was the largest since 1981. Overall, energy prices have jumped 25% from a year ago. Bottlenecks in supply from a number of factors have been the prime reason behind the increase in price. Investors have been skeptical regarding the pick-up in inflation in the prior session, however, yesterday’s data instilled fear and led to massive selling. Wall Street’s fear gauge VIX also jumped to 27.59 and technology shares suffered the most as investors reevaluated their high valuation. Zacks' Top Picks to Cash in on Artificial Intelligence In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
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