Wall Street stocks tick lower as investors look ahead to inflation data
US stock markets closed lower on Tuesday, snapping an eight-day winning streak as Tesla shares dropped and investors took a cautious approach ahead of a round of important data on inflation.
The blue-chip S&P 500 share index, which on Monday closed out its longest unbroken series of all-time highs since 1997, closed down 0.3 per cent. The technology-focused Nasdaq Composite was 0.6 per cent lower at the bell as both Wall Street indices were dragged down by a fall in the shares of Tesla.
Shares of the electric car maker slid after Twitter users polled by co-founder Elon Musk voted that he should sell 10 per cent of his stake in the company. Its shares declined 12 per cent on Tuesday, taking their two-day drop to more than 16 per cent. Since the start of the week, just under $200bn has been sliced off of its market capitalisation.
Also weighing down equities was a big drop in PayPal shares, which were 10 per cent lower at the bell on a weak earnings report.
In Europe, the regional Stoxx 600 share index closed down 0.2 per cent.
Investors shifted into long-dated US government debt, lifting the price of the 10-year benchmark Treasury note and, in turn, knocking its yield by 0.06 of a percentage point to 1.43 per cent. The yield on the note was about 1.6 per cent before the Federal Reserve’s monetary policy decision last week, when Jay Powell, chair, announced the central bank would begin tapering its purchases of government debt.
The rally in Treasuries also came ahead of US inflation figures due on Wednesday, which are forecast to show that consumer prices rose 5.8 per cent in October from the same month last year, representing the highest rate of increases since 1990.
Consumer price inflation has been running at 5 per cent or more since May, triggering a debate about whether the Fed will change its view of the situation as a transitory effect of pandemic-related disruptions.
But moves in the rates market suggested that investors were not too worried about the inflation print. Longer-dated Treasury yields typically rise with inflation expectations as price pressures erode the value of the debt. The 30-year Treasury yield dropped to its lowest level since July before retracing some that move to end the day 0.06 of a percentage point down to 1.82 per cent.
Powell said last week that it remained too early in the economic recovery from the pandemic to raise interest rates to battle price rises, which the Fed has linked to supply-chain bottlenecks, higher food prices and a worker shortage.
Fahad Kamal, chief investment officer at Kleinwort Hambros, said that the end of Covid-19 job support schemes may “see workers come back into the labour market in a big way, taking away that big risk of structural inflation”, where higher wages feed into prolonged rises in the cost of living.
Elsewhere in government debt markets, Germany’s 10-year Bund yield was down 0.06 of a percentage point at minus 0.30 per cent, its lowest level since September.