Markets mixed, US inflation highest in over 30 years

Markets were mixed on Wednesday.

The S&P 500 fell 0.8 percent and the Nikkei 225 fell 0.6 percent. However, the STOXX Europe 600 rose 0.2 percent.

“The CPI report today contributed to the weakness,” Liz Ann Sonders, Charles Schwab chief investment strategist, said after a report on Wednesday showed that US consumer prices rose 6.2 percent from a year ago, the most since December 1990.

“If inflation doesn’t subside, the Federal Reserve may need to taper at a more substantial rate and hike interest rates, which could hurt stocks and bonds,” Nancy Davis, founder of Quadratic Capital Management, said.

Indeed, Seema Shah, chief strategist at Principal Global Investors, said: “Inflation is clearly getting worse before it gets better, while the significant rise in shelter prices is adding to concerning evidence of a broadening in inflation pressures.”

However, some economists noted that a fall in the Baltic Dry Index provides hope that inflation will abate.

“The decline in the Baltic Dry Index may be signaling that some of the overheating in the economy that has been taking place is reversing itself,” said Gus Faucher, chief economist at PNC Financial Services.