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Dow Falls More Than 650 Points as Inflation Spooks Investors

The Dow plummeted more than 650 points and remained sharply lower most of the day as investors apparently took a closer look at commodity prices and upticks in the Consumer Price Index.

Gasoline futures hit $2.20 on Monday, a three-year high, following the cyber ransomware attack on Colonial Pipeline. The weekend’s attack shut down a vital gasoline lifeline stretching from Texas to New Jersey, The New York Times reported.

Colonial Pipeline issued a statement late Monday evening to report a small section of the line, running from North Carolina to Maryland, has resumed some capacity after being manually restored. However, the larger network remains offline, though the company hopes to have it largely restored by the end of the week.

This constraint certainly won’t help the already high retail gasoline prices, which yesterday AAA reported currently stand at $2.96 nationally — the highest it has been since November 2014.

This morning also saw the S&P 500 and Nasdaq Composite both down more than 2 percent and remained sharply lower most of the day.

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Commodity Prices Out of Control

The signs of inflation have been in the news for months, so it is uncertain what triggered today’s sell-off. Trending Economics has a laundry list of commodity prices that have reached new year-to-date highs:

  • Crude oil up 33 percent
  • Pork up 58 percent, beef up 12 percent and poultry up 19 percent
  • Soybeans up 25 percent, canola up 61 percent and corn up 58 percent
  • Copper and steel up 35 percent, cobalt up 40 percent and tin up 46 percent

Lithium’s New Norm

And lithium.

Do you think these inflationary signs point to the start of a new recession?

Commodity traders have been raising the alarm over price increases in lithium carbonate, the main component in lithium-ion batteries that power everything from smartphones to electric cars.

The material, tightly controlled — and priced — by China, hit 90,000 yuan (about $14,000) per metric ton in April. As recently as January, lithium was priced at almost half this amount, a 94 percent increase.

Larger Inflationary Worries

As The Western Journal reported last week, the prices of everything from lumber, construction costs, cars and homes are on the rise, but the Federal Reserve and the Biden administration are taking a largely “hands-off” approach. Treasury Secretary Janet Yellen made a very small overture acknowledging inflation last week.

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“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat,” Yellen said, according to CNBC. “Even though the additional spending is relatively small relative to the size of the economy, it could cause some very modest increases in interest rates.”

However, later that same day, CNBC reported that “she tempered her comments somewhat on the need for higher rates, saying she respects the Federal Reserve’s independence and was not trying to influence decision-making there.”

But with every signal pointing to a grim financial reality facing America, it seems some decisive action is needed to stave off a wholesale recession.

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Eric Nanneman is a business and technology writer with more than 20 years of investment and banking experience, including stints at Bank of America, Charles Schwab, and Goldwater Bank. He was previously securities registered, holding the Series 7, 63, 9 and 10 FINRA licenses.
Eric Nanneman is a business and technology writer with more than 20 years of investment and banking experience, including stints at Bank of America, Charles Schwab, and Goldwater Bank. He was previously securities registered, holding the Series 7, 63, 9 and 10 FINRA licenses.

He graduated from Arizona State and the Pontifical College Josephinum with degrees in English and philosophy. He has one adult son and resides in Phoenix.




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