Stock Market Today

Stock Market Today: Persistent Inflation Gut-Punches Tech Stocks

The highest jump for consumer prices in 30-plus years stole headlines Wednesday, but evidence of persistent inflation was the real worry for markets.

Stock-market bears got a bit more aggressive Wednesday after a worrisome October inflation report revealed relentlessly rising prices, triggering a spike in bond yields.

The Bureau of Labor Statistics said October's headline consumer price index (CPI) jumped 6.2% over last year's depressed levels – the swiftest such move since 1990 – but more importantly, at a higher-than-expected 0.9% month-over-month, which was its quickest pace since 2008.

Particularly worrisome were signs that climbing consumer costs couldn't just be chalked up to temporary causes such as supply-chain woes.

"The details within the report signaled strengthening persistent pressures, though transitory forces also picked up," says BofA Securities. "[Rent equivalents] and rent inflation were a big focus for this month: They printed a 0.4%+ MoM clip for a second time, providing additional confirmation of a reset to a higher trend."

BofA notes that rents are the biggest cyclical driver of inflation and "therefore the most crucial component to monitor for persistent price pressures."

However, some – including Rick Rieder, BlackRock's chief investment officer of global fixed income – remain slightly more optimistic that most of the currently inflationary pressures are temporary.

Sign up for Kiplinger's FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

"It is likely that in time pandemic distortions and extreme base effects will ease, pulling aggregate prices back toward a 2% rate of growth and allowing quantities to continue expanding once supply pressures alleviate," says Rieder, though he concedes "this will take time."

Bond yields immediately responded, jumping roughly 10 basis points to as high as 1.592%. (A basis point is one one-hundredth of a percentage point.) That weighed heaviest on technology and tech-related shares, where higher interest rates can sharply dig into future growth.

"FAANGs" such as Amazon.com (AMZN, -2.6%) and Google parent Alphabet (GOOGL, -2.0%) struggled, and red-hot semiconductor shares including Advanced Micro Devices (AMD, -6.1%) and Nvidia (NVDA, -3.9%) were put on ice.

The result? The Nasdaq Composite retreated by 1.7% to 15,622, while the S&P 500 (-0.8% to 4,646) and the Dow Jones Industrial Average (-0.7% to 36,079) sustained somewhat lesser declines.

And a reminder: the stock market is open for Veterans Day.

stock chart for 111021

YCharts

Other news in the stock market today:

  • The small-cap Russell 2000 declined 1.6% to 2,389.
  • U.S. crude futures slumped 3.3% to settle at $81.34 per barrel, snapping their three-day winning streak.
  • Gold futures gained 1.0% to finish at $1,848.30 an ounce.
  • The CBOE Volatility Index (VIX) popped 5.7% to 18.79.
  • Bitcoin made another run higher Wednesday, flirting with the $69,000 level today before being repelled. As of the afternoon, the cryptocurrency was off 2.5% from yesterday's prices to $65,622.00. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
  • Electric vehicle maker Rivian Automotive (RIVN), which is backed by the likes of Amazon.com and Ford (F), pulled off the largest U.S. initial public offering (IPO) since 2014. The company raised $11.9 billion, topping every other offering since Alibaba Group (BABA). The EV play priced its shares at $78 and jumped as high as $106.75, eclipsing $100 billion in market value – this, despite that Rivian expects to generate less than $1 million in third-quarter revenue. RIVN closed 29.1% higher to $100.73, at a market value of more than $98 million, which is larger than U.S. giants General Motors (GM) and Ford.
  • Mastercard (MA, +3.9%) flashed some green ink amid a sea of red after delivering encouraging projections during an investor-day event. The company said that for 2022-24, it expected to grow net revenues in the high teens (from low teens in 2019-21) and earnings per share in the low 20s (from high teens). The company says it sees "significant untapped opportunity" in the $255 trillion total addressable market for payments. Piper Sandler analyst Christopher Donat maintained his Neutral stance on shares, however, saying that "While we believe that MA has significant opportunities in front of it, many of these opportunities have been available for years."

Protect Yourself From Inflation

The latest CPI report doesn't signal doom for stocks, but it's certainly a hurdle to overcome.

"The bond market is telling you that the [Federal Reserve] is way behind the curve on policy, as short rates rocketed while long rates have taken the release in stride," says Cliff Hodge, chief investment officer for Cornerstone Wealth, who adds that "a flattening curve does not portend well for risk assets into next year."

Chris Zaccarelli, CIO for Independent Advisor Alliance, agrees the Fed might need to speed up their tightening of fiscal policy.

As for stocks?

"We have already been positioning for higher inflation in our investments by using energy companies and higher-quality companies – those with strong balance sheets, a competitive moat around their business and pricing power – as a way to lessen any impact that higher prices will have on profit margins."

Investors have other ways to protect themselves from rising prices – these five mutual funds represent traditional ways to hedge against inflation, though this new ETF with a fresh strategy is worth exploring, too.

Indeed, you might have more options than you think. Our look at how to shield yourself from inflation contains a variety of ideas, including stocks, ETFs, mutual funds and even commodities. Check it out.

Kyle Woodley was long AMD, AMZN and NVDA as of this writing.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Resist the Impulse to Buy These 14 Holiday Gifts
shopping

Resist the Impulse to Buy These 14 Holiday Gifts

Don't let those holiday sale promotions persuade you into buying something now that will be much cheaper later.
November 18, 2021
Should You Take an Extra Big RMD This Year?
required minimum distributions (RMDs)

Should You Take an Extra Big RMD This Year?

Sometimes only taking the minimum IRA distribution can be a costly mistake. When deciding how much to withdraw this year, you need to consider the big…
November 23, 2021

Recommended

Stock Market Today (12/6/21): Optimism on Omicron Gives Stocks a Kick
Stock Market Today

Stock Market Today (12/6/21): Optimism on Omicron Gives Stocks a Kick

"Encouraging" preliminary data on the omicron strain's severity sparked every market sector to gains on Monday.
December 6, 2021
GameStop (GME) Earnings on Tap as End of Q3 Season Nears
stocks

GameStop (GME) Earnings on Tap as End of Q3 Season Nears

Our preview of the upcoming week's earnings reports includes Toll Brothers (TOL), GameStop (GME) and Costco Wholesale (COST).
December 6, 2021
Stock Market Today (12/3/21): Stocks Turn Tail Amid November Jobs Miss, Omicron
Stock Market Today

Stock Market Today (12/3/21): Stocks Turn Tail Amid November Jobs Miss, Omicron

Wall Street capped off an omicron-inspired zigzag week of trading with a dip after November's headline jobs figure came up short.
December 3, 2021
Kiplinger's Weekly Earnings Calendar
stocks

Kiplinger's Weekly Earnings Calendar

Check out our earnings calendar for the upcoming week, as well as our previews of the more noteworthy reports.
December 3, 2021