Dow nosedives
Wall Street nosedived today after an upswing in consumer prices intensified US investors’ fears that the Federal Reserve will extend its nearly two-year string of interest rate increases.
The Dow Jones industrial average suffered its biggest one-day loss in three years, and the Nasdaq composite index turned negative for 2006.
Investors were spooked by a Labour Department report that its consumer price index swelled 0.6% in April, topping forecasts of 0.5%. But core CPI – without food and energy – also gained 0.3%, ahead of estimates and adding to worries that soaring oil prices have begun to lift prices elsewhere.
The inflation data dragged bonds lower and overshadowed solid earnings from Hewlett-Packard and cooling oil prices. Wall Street has been anxious about economic news after the Federal Reserve last week said more rate hikes could be needed to battle inflationary pressures from record commodities prices.
“The CPI data really kicked the market in the teeth today,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “So the question now really is where can we find some support?”
As the Dow came within 80 points of its best close of 11,722.98 last week, many analysts felt the market was overbought and would soon see a correction. But Tower said stocks were now oversold after several days of steep losses, suggesting that investors may start looking for positive signs to spur buying.
The Dow sank 214.28, or 1.88%, to 11,205.61, a one-month low. The Dow slid as much as 245.51 points earlier and logged its biggest single-session slide since falling 307 points on March 24, 2003.
Broader stock indicators declined. The Standard & Poor’s 500 index lost 21.76, or 1.68%, to 1,270.32, its lowest since finishing at 1,262.86 on February 13; the Nasdaq fell 33.33, or 1.5%, to 2,195.80, showing a loss for the first time in 2006.
