Trish Regan’s Market Notes: Stocks Plunge As INFLATION Reality Sets In

U.S. stock index futures are plummeting as reality sets in.

A new read on inflation by the Commerce Department for March shows core prices are up 0.4%, and inflation for the year has increased by 2.3%, compared to 1.5% in the previous month.

The Biden tax proposal is coming at a bad time — amid increasing concerns about record-high valuations, as well as fears that a fresh stall in global supply chains (tied to international struggles with Covid-19) will put pressure on prices for consumer goods causing them to inflate.

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Otherwise, things had been looking up. Of the 290 companies in the S&P 500 that have reported results so far, 88% have met or beaten estimates. The U.S. GDP grew 6.4% in the latest quarter (not bad!) and unemployment claims are still trending lower.

BUT – The president is proposing the biggest expansion of taxes and spending in the history of our nation ad that has some investors taking a moment to pause. As they should. Because IF the President were successful with his endeavor (and let’s hope he’s not) the results would be catastrophic for our markets and our economy.

Good Thing Biden’s Got The Fed!

Amid these concerns over Biden’s unprecedented expansion of taxes and spending, the Fed is still propping up the market, continuing its policy of near-zero interest rates, but if global supply chains stall out and prices escalate — won’t the Fed need to act against inflationary pressures?

Reality Check

The market is long overdue for a reality check.

Even Twitter investors know it. Its stock price was lower in Friday’s pre-market as the company warned it might not be able to continue growing users at such an impressive rate. (Without a tweeting President to feed the news cycle and the twitter universe, how can it?)

Shares of Apple are also down in the pre-market, due to concerns about microchip supply.

China Reins in Tech Giants

MSCI Asia Pacific and MSCI Emerging Market Index are both lower amid concerns over Chinese regulators are cracking down on Chinese tech companies gaining prominence in the financial sector.

The Chinese government is imposing stricter compliance rules for companies listing abroad and curbs on information monopolies and the gathering of personal data. Tencent Holdings, ByteDance were some of the companies affected. Shares in Tencent, Meituan, and JD fell between 1% and 3% early Friday.

European Stocks Drop

European markets dipped as well. Stoxx Europe 600 Index by 0.4%, dragged by raw materials and tech shares. AstraZeneca earnings outperformed projections.

Oil Drops

Oil experienced a correction as well, as investors believe the pandemic in India will to threaten demand. West Texas Intermediate crude declined 1.9%, Brent crude fell 1.5%. I see this as a buying opportunity because I would not be surprised to see oil hit $75 per barrel as we get into summer driving months.

Bond Yields Creep Up

U.S. Treasury yields gained slightly, with the yield on 10-year at 1.645%.

The U.S. dollar strengthened against all major currencies, and the Bloomberg Dollar Spot Index gained 0.2%.

Gold weakened 0.1% to $1,769.91 an ounce.

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