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Market Snapshot

https://www.briefing.com/stock-market-update

Dow 31834.11 -326.63 (-1.02%)
Nasdaq 11364.23 -373.44 (-3.18%)
SP 500 3935.17 -65.88 (-1.65%)
10-yr Note +28/32 2.924
NYSE Adv 933 Dec 2274 Vol 1.2 bln
Nasdaq Adv 942 Dec 3337 Vol 6.0 bln

Industry Watch
Strong: Energy, Materials, Utilities
Weak: Information Technology, Consumer Discretionary, Communication Services, Financials

Moving the Market

-- Total CPI and core CPI, which excludes food and energy, both increase more than expected in April

-- Mega-caps weighing on the market with sizable declines

-- Oil prices jump amid encouraging COVID news out of China

Mega-caps lead market lower, CPI data comes in hot
11-May-22 16:15 ET
Dow -326.63 at 31834.11, Nasdaq -373.44 at 11364.23, S&P -65.88 at 3935.17

[BRIEFING.COM] The S&P 500 fell 1.7% on Wednesday, as the market was pressured by pronounced weakness in the mega-caps despite a decline in long-term interest rates. Growth concerns persisted as hot consumer pricing data for April reinforced expectations for the Fed to stay aggressive with tightening monetary policy.

The Nasdaq Composite (-3.2%) and Russell 2000 (-2.5%) underperformed the benchmark index, with the Nasdaq -- having more exposure to the mega-caps -- taking the brunt of the damage. The Dow Jones Industrial Average (-1.0%) declined 1.0%.

From a sector perspective, the heavily-weighted information technology (-3.3%) and consumer discretionary (-3.6%) sectors both dropped more than 3.0%, owed in large part to huge declines in stocks like Apple (AAPL 146.50, -8.01, -5.2%) and Tesla (TSLA 734.00, -66.04, -8.3%).

Three sectors did escape with a gain, namely energy (+1.4%), utilities (+0.8%), and materials (+0.03%), but the heavy losses of the mega-caps was not a pretty sight. The mega-cap losses not only weighed on the market-cap-weighted indices but also on risk sentiment, which only seemed to worsen as the day progressed.

Initially, there was some relief in the how the market shook off an initially bad response to the CPI report. The monthly figures were disappointing relative to expectations, although the year-over-year readings did moderate versus March. For April, total CPI increased 0.3% m/m (Briefing.com consensus 0.2%) while core CPI, which excludes food and energy, increased 0.6% m/m (Briefing.com consensus 0.4%).

After the news settled in, the longer-end of the Treasury market appreciated the idea that inflation rates could be peaking. At the same time, though, there was a fearful belief that the Fed would make sure that inflation peaks by tightening policy in a way that stymies economic growth.

The 10-yr yield, which is sensitive to expectations for inflation and economic growth, fell seven basis points to 2.92% after brushing up against 3.08% on the heels of the CPI report. The 2-yr yield, which is most sensitive to changes in the fed funds rate, increased one basis point to 2.64%. The U.S. Dollar Index increased 0.1% to 104.01.

Back to the equities, smaller and more speculative growth stocks continued to bleed. This time it was Coinbase Global (COIN 53.72, -19.27, -26.4%), Unity Software (U 30.30, -17.83, -37.1%), and Fiverr (FVRR 30.39, -10.48, -25.6%) following their disappointing earnings reports and/or guidance.

WTI crude futures, meanwhile, jumped 5.1%, or $5.12, to $105.14/bbl amid hope that Shanghai could soon ease restrictions after reporting a 51% drop in new COVID-19 cases on Tuesday. An ease in restrictions would hopefully increase oil demand.

Separately, Lorie Logan was named Dallas Fed President, effective Aug. 22, while the Senate confirmed Lisa Cook to the Fed Board.

Reviewing Wednesday's economic data:

Total CPI increased 0.3% month-over-month in April (Briefing.com consensus 0.2%) and core CPI increased 0.6% month-over-month (Briefing.com consensus 0.4%). Total CPI was up 8.3% year-over-year, down from 8.5% year-over-year in March, and core CPI was up 6.2% year-over-year, down from 6.5% year-over-year in March.
The key takeaway from the report is that it provided some leeway that suggests peak inflation might have been hit, but with the moderation not as significant as had been hoped, it also stirred concerns that inflation might stick at persistently high levels longer than anyone would like, including the Fed.
The Treasury Budget showed a $308.2 bln surplus in April versus a $225.5 bln deficit in the same period a year ago. The budget data is not seasonally adjusted, so the April surplus cannot be compared to the March deficit of $192.6 bln.
The budget deficit over the last 12 months is $1.20 trln versus a deficit of $1.73 trln in March.
The weekly MBA Mortgage Applications Index increased 2.0% following a 2.5% increase in the prior week.

Looking ahead, investors will receive the Producer Price Index for April and the weekly Initial and Continuing Claims report on Thursday.

Dow Jones Industrial Average -12.4% YTD
S&P 500 -17.4% YTD
Russell 2000 -23.5% YTD
Nasdaq Composite -27.4% YTD

Crude futures settle above $105 per barrel
11-May-22 15:35 ET
Dow -155.13 at 32005.61, Nasdaq -314.03 at 11423.64, S&P -43.12 at 3957.93

[BRIEFING.COM] The S&P 500 is down 1.1%, and the Russell 2000 is down 1.9%.

One last look at the S&P 500 sectors before the close shows information technology (-3.0%) and consumer discretionary (-3.0%) both down 3% amid pronounced weakness in the mega-caps. This helps account for the sharp decline in the S&P 500 despite five sectors trading higher.

Energy (+2.5%) is still leading the way amid the rise in oil prices, followed by utilities (+1.2%) and materials (+0.9%) with 1% gains.

WTI crude futures settled higher by $5.12 (+5.1%) to $105.14/barrel amid hope that Shanghai could soon be on the path to loosening COVID restrictions.
Lorie Logan named Dallas Fed President
11-May-22 14:55 ET
Dow -146.77 at 32013.97, Nasdaq -284.55 at 11453.12, S&P -36.93 at 3964.12

[BRIEFING.COM] The S&P 500 is down 0.8% after being down 1.5% earlier this afternoon. The mega-caps continue to be the biggest weights on the market, as the Vanguard Mega Cap Growth ETF (MGK 189.67, -4.22, -2.2%) trades lower by 2% despite a six-basis-point decline in the 10-yr yield (2.92%).

Earlier this afternoon, Lorie Logan was named Dallas Fed President, effective Aug. 22, following Robert's Kaplan resignation. On a related note, the Senate confirmed Lisa Cook to the Fed Board on Tuesday.

Looking ahead, Walt Disney (DIS 105.75, -1.93, -1.8%) will headline the earnings calendar after the close. Bumble (BMBL 18.20, -1.03, -5.4%) and Beyond Meat (BYND 27.07, -3.23, -10.6%) are some other notable companies that will report earnings after the close.
Higher April tax receipts, lower spending provide US gov't second monthly surplus of FY22
11-May-22 14:30 ET
Dow -51.75 at 32108.99, Nasdaq -228.91 at 11508.76, S&P -20.91 at 3980.14

[BRIEFING.COM] The major averages have trimmed their session losses modestly following the release of the April Treasury Budget. In short, strong growth from receipts and shrinking spending related to COVID allowed for the second monthly surplus in the government's fiscal year 2022.

The Treasury Budget for April showed a surplus of $308.22 bln versus a deficit of $225.58 bln a year ago. The Treasury Budget data is not seasonally adjusted, so the April surplus cannot be compared to the deficit of $192.63 bln for March.

Total receipts of $863.65 bln increased 96.6% compared to last year while total outlays of $555.43 bln were down about 16.4% compared to last year.

The total year-end budget deficit now stands at $360.00 bln, down around -81.4% y/y, vs $1.93 trln last year.
Gold higher following higher than expected CPI readings
11-May-22 14:00 ET
Dow -264.12 at 31896.62, Nasdaq -316.90 at 11420.77, S&P -52.70 at 3948.35

[BRIEFING.COM] The tech-heavy Nasdaq Composite (-2.70%) is today's worst-performing major average with about two hours remaining on Wednesday.

Gold futures settled $12.70 higher (+0.7%) to $1,853.70/oz, aided in part by this morning's higher than expected inflation readings.

Meanwhile, the U.S. Dollar Index is little changed at $103.90.