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Wall Street stocks tick lower as investors look at inflation data

U.S. stock markets slumped Tuesday, threatening to tear off an eight-day winning streak as Tesla stocks fell and investors took a cautious  -proach ahead of a round of key inflation data.

The blue-chip S&P 500 stock index, which closed its longest uninterrupted series of all-time highs since 1997 on Monday, had fallen 0.4 percent in the New York afternoon. The tech-driven Nasdaq Composite lost 0.5 percent as both Wall Street indices were dragged down by a decline in Tesla stocks.

The electric car maker’s shares fell after Twitter users polled by co-founder Elon Musk voted to sell 10 percent of its stake in the company. The stock was down 9 percent on Tuesday, increasing its two-day decline to nearly 14 percent and dropping its value by more than $ 165 billion.

A sharp drop in PayPal stocks also added to the drag on stocks, which fell about 12 percent on a weak earnings report.

In Europe, the regional Stoxx 600 share index closed 0.2 percent.

Investors switched to long-dated US Treasuries, which increased the price of the 10-year benchmark Treasury bond, and thus the yield, by 0.06 percentage points to 1.43 percent. The note’s return was around 1.6 percent ahead of the Federal Reserve’s monetary policy decision last week when Jay Powell, chairman, announced that the central bank would be scaling back its government bond purchases.

The rally in US Treasuries also preceded US inflation figures due Wednesday, which show consumer prices rose 5.8 percent in October from the same month last year, the highest rate of increase since 1990.

Consumer price inflation has been at 5 percent or more since May, sparking debate over whether the Fed will change its view of the situation as a temporary effect of pandemic disruptions.

However, movements in the interest rate market indicated that investors weren’t too concerned about inflationary pressures. Longer-term government bond yields tend to rise with expectations of inflation as price pressures reduce the value of the debt. The yield on 30-year government bonds fell 0.07 percentage points to 1.81 percent, the lowest level since July.

Powell said last week that it is too early in the economic recovery from the pandemic to hike interest rates to combat price hikes, which the Fed has linked to supply chain bottlenecks, higher food prices and a labor shortage.

Fahad Kamal, chief investment officer at Kleinwort Hambros, said the end of the Covid-19 employment promotion programs could lead to “large numbers of workers returning to the labor market and eliminating the great risk of structural inflation” where higher wages are conducive to a sustained rise in the cost of living.

Elsewhere in the government bond markets, the yield on ten-year German government bonds fell by 0.06 percentage points to minus 0.30 percent, the lowest level since September.

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