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- US shares closed higher on Tuesday as investors shrugged off inflation concerns.
- "It will take a string of months of significant surges with prices to get a bigger reaction," an analyst said.
- They also remained unfazed over the Johnson & Johnson vaccine halt.
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US shares closed higher on Tuesday as investors shrugged off concerns following the higher-than-expected March inflation data and remained unfazed by US officials halting the administration of Johnson & Johnson vaccines over blood clot incidents.
"Everyone knew prices were going to jump and it will take a string of months of significant surges with prices to get a bigger reaction in the market," Edward Moya, senior market analyst at OANDA, said in a note. "The rise in Treasury yields will remain capped until we find out if the upcoming pricing pressures over the next few months are outsized."
The Consumer Price Index, a popular measure of overall inflation, rose 0.6% in March from February, the Labor Department reported Tuesday, fueled by an economy rebounding from the pandemic recession.
The CPI shot up 2.6% from the same period a year ago – roughly in line with the 2.5% expectation from economists polled by Reuters – when large swathes of the country were in lockdown to curb the spread of the virus. Among the biggest contributors were gasoline prices, which surged 9.1% in March, and food.
The year-over-year climb is the highest since August 2018. It is also higher than the 1.7% recorded in February. It is important, however, to keep in mind that in March 2020, prices, in general, declined when the pandemic first froze economic activity.
"Taking a step back to examine the data, we find that year-on-year comparisons are becoming somewhat exaggerated as we look back to the decline in prices from 12 months ago," Rick Rieder, BlackRock's chief investment officer of global fixed income, said in a note. "That 'base effect' impact was somewhat contained in today's print, but it will become more pronounced in the months to come."
Rieder said this gives "inflation doomsayers" strong ammunition yet again in calling for runaway inflation. He added that the base effects will eventually go the opposite direction, which will then allow the Federal Reserve to describe the inflation spike as "transitory."
US Treasury yields fell after a strong 30-year bond auction, Reuters reported. The benchmark 10-year US Treasury note was lower by 4.9 basis points to 1.63% from the 1.675% at the end of Monday. The 30-year yield was 4.1 basis points lower at 2.31%.
Here's where US indexes stood at the 4 p.m. ET close on Tuesday:
- S&P 500: 4,141.66, up 0.33%
- Dow Jones industrial average: 33,679.44, 0.2% (65.96)
- Nasdaq composite: 13,996.10, up 1.05%
Johnson & Johnson shares fell by as much as 3.5% after the US Food and Drug Administration and the Centers for Disease Control and Prevention jointly recommended a pause in its Covid-19 vaccine over blood clot reports in some people who had received the shot. It remains unclear if this will impede President Joe Biden's goal of administering 200 million vaccines in his first 100 days.
NovoCure Limited shares spiked as much as 65% to its highest since it listed in 2015 after the global oncology company gave an update on its phase three trial for the treatment of non-small cell lung cancer.
Roblox stock bounced up as much as 8.9%to an intraday high of $81.70 after the company announced a deal with toymaker Hasbro to launch some digital products with the online games platform. The deal will feature a range of Roblox-inspired Nerf blasters and a Roblox version of the classic board game Monopoly.
Bitcoin broke its record for the second straight day, soaring to an all-time high above $63,000 amid excitement ahead of Coinbase's direct listing on the Nasdaq Wednesday. The popular coin was trading higher by 4.22% to $62,682 as of 3:30 p.m. ET.
The rally extended to other cryptocurrencies. Ether spiked as much as 8% to a new record high, hitting a $250 billion market capitalization for the first time. Dogecoin made new records as well, jumping 34% to a valuation of $11 billion.
Oil prices edged higher after strong Chinese import data, Reuters reported, shrugging off tensions in the Middle East, which thus far have not affected oil supply. West Texas Intermediate crude climbed 1.17%, to $60.40 per barrel. Brent crude, oil's international benchmark, rose 1.00% to $63.91 a barrel.
Gold, widely viewed as a hedge against inflation, slightly rose 0.05%, to $1,744.95 per ounce, breaking a three-day losing streak, as the March inflation data surged higher than expected.
Spot lumber prices, meanwhile, hit a record high of nearly $1,200 per thousand board feet.