Inflation Drives Markets Lower

123jump.com Staff
20 Apr, 2005
New York City

Steady drumbeat of good earnings report continued to roll this morning. However, market decided to focus on March consumer price index report. The core inflation was significantly higher than expected pushing the market averages lower.

In the end investors decided to overlook earnings report and paid attention to infolation. Core inflation as reported by Labor Department this morning showed biggest gain in consumer price index in five months at 0.6% for March as costs increased for energy, food, apparel, medical and heath care services, transportation costs. Core rate of inflation was still high by 0.4% excluding the volatile energy and food prices.

The Fed survey of regional banks noted that inflationary pressures are building in the economy but the 10 year note yield declined from 4.20% to 4.21%.

While stock market began trading on bullish tone, tech stocks surged in the early hours, Intel, Juniper, Yahoo, delivered better than earnings, banks continued to deliver better than expected earnings.

Specialty stocks were hit the hardest, American Eagle, Pacific Sun, Urban Outfitters, Chico’s all traded and closed lower.

Strong earnings from Caterpillar, Intel and Yahoo supported rise in their stocks but these stocks remained volatile throughout the day. Google rose close to $7 on the back strong search related advertising revenue at Yahoo.

Department of Energy said in its weekly inventory report that the supply of Crude last week fell by 8% and gasoline supply by 5%. This spiked the May Crude price during the day but closed only 15 cents higher and closed at $52.44. Last week U.S. gasoline demand was at 9 million barrel per day, 1.2% higher than a year earlier.

Market Averages at the end of April 20, 2005 were as follows:

S&P – Down 1.33%
Nasdaq – Down 0.96%
Dow – Down 1.14%

In Other News

European Markets close lower, shares in London down 0.69%, Frankfurt down 0.62%, Paris down 0.31% and in overnight trading Tokyo down 0.24%
In NY trading June COMEX gold closed up $2.70 at $436.70, May COMEX silver up 8.7 cents to $7.337 per ounce
Italian Prime Minister Mr. Berlusconi resigned and plans to form a new government


In Earnings News

Continental Airlines reported wider 1Q loss of $2.77 vs. $1.90 a year ago
Ford Motor company report 1Q profit of 60 cents vs. 94 cents a year ago
Caterpillar Inc. report 1Q profit of $1.90 vs. $1.19 a year ago
JPMorgan Chase report 1Q profit of 63 cents vs. 92 cents a year on 70% expanded share base
Altria Group reported 1Q profit of $1.25 vs. $1.07 a year ago