Wall Street slips as inflation jitters spark broad sell-off

NEW YORK (Reuters) -Wall Street lost ground on Tuesday as rising commodity prices and labor shortages fueled fears that, despite reassurances from the U.S. Federal Reserve, near-term price spikes could translate into longer-term inflation.

By late afternoon the indexes were off their session lows, but the sell-off was fairly evenly dispersed across the sectors.

Economic data released on Tuesday from the Labor Department showed job openings at U.S. companies jumped to a record high in March, further evidence of the labor shortage hinted by Friday’s disappointing employment report.

The report suggests labor supply is not keeping up with surging demand as employers scramble to find qualified workers.

Burrito chain Chipotle Mexican Grill announced it would hike the average hourly wage of its workers to $15, a further sign that the worker shortage in the face of a demand revival could add fuel to the inflation surge.

That worker shortage, along with a supply drought in the face of booming demand could contribute to what is seen as inevitable prices spikes, which the U.S. Federal Reserve has repeatedly said are unlikely to translate into long-term inflation.

“The market is beginning to debate whether or not the Fed is right on inflation,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “Will this be more than transitory? That’s what the market is beginning to discount.”

Market participants will scrutinize the Labor Department’s CPI report, due early Wednesday, for further signs of potential inflationary pressures. (Graphic on inflation) tmsnrt.rs/2SxpkST

The Dow Jones Industrial Average fell 456.51 points, or 1.31%, to 34,286.31, the S&P 500 lost 33.76 points, or 0.81%, to 4,154.67 and the Nasdaq Composite dropped 5.58 points, or 0.04%, to 13,396.28.

All 11 major sectors of the S&P 500 were in negative territory, with energy stocks suffering the largest percentage loss.

The CBOE Volatility index, a measure of investor anxiety, touched its highest level in two months.

First-quarter reporting season, which is providing the first year-on-year comparison to pandemic-related shutdowns, is approaching the finish line with 451 constituents of the S&P 500 having reported. Of those, 86.9% have beaten consensus expectations, according to Refinitiv IBES.

Analysts now see first-quarter S&P earnings growth of 50.5% year on year, up substantially from the 16% growth forecast at the beginning of the year, per Refinitiv.

Boeing Co was down 1.6% after the planemaker announced deliveries of its 737 MAX fell to just four planes in April due to an electrical problem.

Tesla Inc continued its slide, dropping 1.2% following the electric automaker’s decision to expand its Shanghai plant owing to heightened U.S.-China tensions.

Mall REIT Simon Property Group Inc fell 2.3% after the company said it does not expect a return to 2019 occupancy levels until next year or 2023.

L Brands Inc announced it will split into two publicly traded companies, Bath & Body Works and Victoria’s Secret. Its stock dropped 3.3%.

Declining issues outnumbered advancing ones on the NYSE by a 2.99-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored decliners.

The S&P 500 posted five new 52-week highs and one new low; the Nasdaq Composite recorded 18 new highs and 216 new lows.