Here are the most important news, trends and analysis that investors need to start their trading day:
- Futures turn lower after consumer prices remain at four decade highs
- 10-year Treasury yield goes back above 3% on strong inflation data
- U.S. oil prices advance after two days of sharp supply concern losses
- Coinbase slumps after the crypto exchange turns in weak quarter
- Stablecoin UST, meant to be dollar pegged, plummets below 50 cents
U.S. stock futures turned lower Wednesday after the first of two key April inflation reports this week showed consumer prices were still at 40-year highs. The data further raises concern that inflation will remain high as the economy slows. The producer price index for April is set release Thursday.
- Wall Street saw a volatile session Tuesday, with the Dow Jones Industrial Average wiping out a 500-point gain, hitting a session-low down roughly 350 points before closing 84 points lower, a fourth straight down day.
- The S&P 500 and the Nasdaq were able to close higher, breaking three-session losing streaks. Dow stock Disney is set to report earnings after Wednesday's closing bell.
The 10-year Treasury yield popped back above 3% on Wednesday after the government's April consumer price index rose a stronger-than-expected 8.3% year over year. Removing volatile food and energy prices, so-called core CPI still rose a great-than-expected 6.2%.
- Inflation has been the single biggest threat to a recovery that began early in the pandemic and saw the economy in 2021 stage its biggest single-year growth level since 1984.
- The big swings in financial markets recently reflect growing worries that the Federal Reserve continues to act too slowly to arrest the spike in inflation.
A source of inflation in the economy has been oil prices and in turn record-high gasoline prices. West Texas Intermediate crude, the American benchmark, rose about 3% to $103 per barrel Wednesday after back-to-back sharp declines.
- The downturn in the two prior sessions was driven by supply concerns as the European Union works to gain support for a Russian oil embargo. A vote on the proposal, which needs unanimous approval, has been delayed as Hungary has dug in its heels in opposition.
Shares of Coinbase sank 20% in Wednesday's premarket, the morning after the crypto exchange reported quarterly revenue dropped 27% to $1.17 billion, falling short of estimates. It also announced a quarterly loss of $1.98 per share. Coinbase noted a decline in users, with the digital currency market recently experiencing a major downturn. Bitcoin has lost more than 50% since its all-time high of more than $68,000 in November. It was lower again Wednesday morning, trading below $30,000.
The two main tokens from embattled crypto project Terra are now in free fall. UST, a so-called stablecoin that's meant to maintain a 1-to-1 peg with the U.S. dollar, plunged to as low as 31 cents Wednesday. Sister token luna dived more than 80% to $3.78.
- Stablecoins are akin to bank accounts for the crypto economy, offering a sound store of value to avoid the kind of volatility cryptocurrencies like bitcoin have become notorious for — in theory, at least. While still new, UST has grown to become a major player in the crypto economy, with a circulating supply of 16 billion tokens.