Inventory futures larger after Dow’s worst day since January

A passenger wears a protective mask at the Wall Street subway station in New York on Monday, March 30, 2020.

Michael Nagle | Bloomberg via Getty Images

Futures contracts, which were pegged to major US stock indices, rose overnight on Wednesday, just hours after continued pressure on technology stocks put the Dow Jones Industrial Average on its worst day since January.

Dow futures rose more than 101 points, while Nasdaq futures and those linked to the S&P 500 also rose.

An announcement that the Colonial Pipeline would resume operations at 5:00 p.m. ET on Wednesday reassured some investors worried they could continue to supply gasoline to the east coast.

The company said in a statement that it could take the supply chain “several” days back to normal operations, but that it would move as much gasoline, diesel and jet fuel as possible to restore normal operations after a hack cause that it was suspended last week.

US stocks pulled back during Wednesday’s regular session, pushing technology stocks down as key inflation data showed above-than-expected price pressures.

The Dow fell 681 points, or 1.99%, its worst session since January. The blue chip index celebrated its worst day since February on Tuesday. The S&P 500 was down 2.1%, its largest one-day decline since February, while the tech-heavy Nasdaq Composite was down 2.6%.

Traders across the board pointed to a rate hike triggered by a higher-than-expected inflation report for the week’s slump.

The Department of Labor reported that the prices American consumers pay for goods and services rose the fastest since 2008 last month, with the consumer price index up 4.2% year over year.

Excluding volatile food and energy prices, the core CPI rose 3% over the same period in 2020 and 0.9% monthly.

“Last week the S&P 500 ended near record highs and today, three days later, it’s down more than 4%!” wrote Jim Paulsen, Chief Investment Strategist of the Leuthold Group.

“Not only are investors dumping growth stocks, which traditionally have not held up well in times of higher inflation, but investors began dumping almost all stocks later in the day as fears mounted that the [Federal Reserve] could be forced to rejuvenate and possibly push rate hikes, “he added.

Investors have been quick to dump growth stocks on creeping inflation worries as rising prices tend to squeeze margins and hurt corporate profits. If price pressure gets too high over a long period of time, the Federal Reserve would be forced to tighten monetary policy.

Tech, a best-performing sector in 2020 amid the height of the Covid-19 pandemic, has come under heavy pressure in recent weeks.

Alphabet, Microsoft, Amazon, and Apple all fell more than 2%. The chip manufacturers covered by the VanEck Vectors Semiconductor ETF fell 4.1%. The Technology Select Sector SPDR is down more than 5% this week and 6% this month.

– CNBC’s Maggie Fitzgerald contributed to the coverage.

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