US STOCKS-Wall St reverses gains, closes lower as aggressive Fed actions loom

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By Stephen Culp

NEW YORK, April 12 (Reuters) – Wall Street turned rally to sell-off on Tuesday, reversing earlier gains as impending monetary tightening from the Federal Reserve once again pulled growth stocks back into red territory.

All three major U.S. stock indexes turned from green to red early in the afternoon, with market-leading, interest-rate sensitive growth stocks falling from the front of the pack to the rear.

The turnabout began in earnest shortly after remarks from Fed Governor Lael Brainard, who reiterated the need for the central bank to “expeditiously” take on decades-high inflation. nL2N2WA1JE

“The comments coming out from Fed officials have been more hawkish than the markets have anticipated,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. “(Brainard) has generally been nondescript, but now she’s more forceful in her commentary, and that’s getting people to sit up and take notice.”

The Labor Department’s CPI report showed the prices urban American consumers pay for a basket of goods posted the biggest monthly jump since September 2005, and an annual surge of 8.5%, the hottest year-on-year inflation number in more than four decades. nL2N2WA0W3

Much of the topline CPI growth was attributable to an 18.3% monthly surge in gasoline prices, to a record high of $4.33 per gallon.

The report did little to budge the needle of expectations regarding impending interest rate hikes from the Federal Reserve.

“It’s reiteration the Fed can’t be sitting back here,” Nolte added. “They need to get moving, post-haste.”

The chart below shows core CPI – which strips out volatile food and energy prices – along with other major indicators, all of which continue to soar well above the Fed’s average annual 2% inflation target:

Early session gains were also dampened after a poor $34 billion 10-year Treasury auction, which helped benchmark yields bounce off session lows. US/

According to preliminary data, the S&P 500 .SPX lost 14.58 points, or 0.33%, to end at 4,398.02 points, while the Nasdaq Composite .IXIC lost 39.48 points, or 0.30%, to 13,372.48. The Dow Jones Industrial Average .DJI fell 88.19 points, or 0.26%, to 34,219.80.

Energy shares .SPNY enjoyed the largest percentage gain among the 11 major sectors in the S&P 500, jumping on the back of surging crude prices CLc1. O/R

First-quarter earnings season bursts through the starting gate later this week, with big banks leading the way.

Analysts have curbed their first-quarter optimism. Annual S&P 500 earnings growth was recently estimated to be 6.1%, down from 7.5% at the beginning of the year.

CrowdStrike Holdings Inc CRWD.O jumped after Goldman Sachs upgraded the cybersecurity company’s shares to “buy”, citing elevated demand.

(Reporting by Stephen Culp; additional reporting by Bansari Mayur Kamdar and Praveen Paramasivam in Bengaluru and Chuck Mikolajczak in New York; Editing by Lisa Shumaker)

((stephen.culp@thomsonreuters.com; 646-223-6076;))