Stocks rebound from inflation fears

Stocks rebounded Thursday from the inflation-fear weakness earlier in the week — though they pulled back a bit from earlier sharp gains.

The Dow, which rose more than 500 points at its peak, finished up 1.3%, or 434 points. It was the index’s best performance since late March. The broader S&P 500 closed up 1.2%, marking its best day since early April.

The Nasdaq Composite, which booked the biggest losses over the past few days, lagged behind in Thursday’s rally and even briefly turned red. It closed up 0.7%.

All week, inflation fears have put a damper on the market. Even though some price increases are a good sign for the economic recovery, investors worry that sudden spikes from the reopening could force the Federal Reserve to change its ultra-loose monetary policy stance. And higher interest rates would be bad for stocks.

Wednesday’s consumer price inflation figures seemed to add fuel to the fire, showing a larger-than-expected jump in prices for April. But as of Thursday morning all of that seems forgotten and the market is back in the green.

That said, the inflation story hasn’t really changed. In fact, Thursday morning’s producer price inflation numbers followed in the CPI’s footsteps and also exceeded expectations. The PPI rose 6.2% in the year ended April, the Bureau of Labor Statistics reported, the biggest increase since annual data was first calculated in November 2010.

“Higher inflation is likely to remain in the spotlight as the post-pandemic recovery accelerates,” said Mark Haefele, UBS Global Wealth Management’s chief investment officer.

Another reality of the post-pandemic world: market volatility.

But that’s not a bad thing, according to Haefele, because a selloff can be an opportunity to snap up quality stocks on the cheap. Whoever did that earlier this week has reaped the benefits of it today.