Stocks sink again on Wall Street as inflation worries mount

Inflation worries rattled Wall Street on Wednesday, pulling the Dow Jones industrial average more than 680 points lower and placing the major stock indexes on track for their worst week in more than six months.

The selling came as investors reacted to a surprisingly big jump in inflation last month that stoked concerns that the economy may bounce back too fast from its pandemic-induced doldrums.

Tech giants, which had soared during the last year of lockdowns, took some of the biggest losses. Only energy stocks eked out a small gain.

Bond yields snapped higher after the government reported that consumer prices rose 0.8% in April, more than expected, and prices rose year over year at the fastest rate since 2008.

The yield on the 10-year Treasury note rose to 1.69% from 1.62% a day earlier, a big move. Bond yields rise when investors fear that an increase in inflation will erode the future value of the income that bonds pay.

The Standard & Poor’s 500 index lost 89.06 points, or 2.1%, and closed at 4,063.04, its biggest one-day drop since late February.

The Dow fell 681.50 points, or 2%, to 33,587.66, the worst decline for the blue chip index since late January. The Nasdaq gave up 357.75 points, or 2.7%, ending at 13,031.68. It was the tech-heavy index’s largest pullback since mid-March.

Small-company stocks gave up the most ground. The Russell 2000 index fell 71.85 points, or 3.3%, to 2,135.14.

Inflation concerns have been hitting the stock market hard this week. The S&P 500, Nasdaq and Dow are on track for their biggest weekly losses since Oct. 30. The Dow and S&P 500 had set all-time highs just last Friday.

Investors have been worrying that inflation could return after being absent for many years as the economy revs out of the recession brought on by the pandemic. Federal Reserve officials and other economists have said moderate inflation may actually be a good thing in a recovery.

Analysts expect consumer prices to rise as the economy recovers, but higher prices could run the risk of curtailing some spending, which the economy needs to sustain its recovery. The cost of new cars rose 0.5% in April, the largest increase since last July, because of heavy demand and a computer chip shortage that has slowed production and reduced dealer supplies.

Rising inflation makes stocks seem more expensive, particularly high-value tech stocks that trade on the potential for their future profits. Apple, Microsoft and Amazon all fell more than 2%.

Tesla fell 4.4%, bringing its pullback this month to nearly 17%. That has the electric-car maker’s stock on pace for its worst month since the pandemic plunge of March 2020, when it lost 21.6%.

Energy prices continued to climb following the shutdown of a major gas pipeline that serves the East Coast earlier in the week, and there are now reports of gasoline hoarding happening in states such as North Carolina.