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Dow falls 526 points amid spike in treasury yields

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The Dow Jones Industrial Average fell 526 points as treasury yields surged following reports of record price increases. Photo by John Angelillo/UPI | <a href="/News_Photos/lp/8bceca601fa3b39501334b6a40921927/" target="_blank">License Photo</a>
The Dow Jones Industrial Average fell 526 points as treasury yields surged following reports of record price increases. Photo by John Angelillo/UPI | License Photo

Feb. 10 (UPI) -- U.S. markets tumbled on Thursday as treasury yields spiked after a key inflation report showed prices rising more quickly than anticipated.

The Dow Jones Industrial Average fell 526.47 points, or 1.47%, while the S&P 500 dropped 1.81% and the Nasdaq Composite closed the day down 2.1%.

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Investors were largely driven by Thursday's consumer price index, which showed prices increased 7.5% year over year for its largest gain since 1982, and how it might impact the Federal Reserve which has pledged to be aggressive in hiking interest rates to combat inflation.

The 10-year treasury yield jumped to 2% for the first time since August 2019, while short-term rates increased even more, with the 2-year yield rising more than 21 basis points, signaling investors expect the Fed to act more aggressively.

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"With another surprise jump in inflation in January, markets continue to be concerned about an aggressive fed," Barry Gilbert, asset allocation strategist for LPL Financial, according to Forbes.

"While things may start getting better from here, market anxiety about potential Fed overtightening won't go away until there are clear signs inflation is coming under control," Gilbert said.

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Comerica Bank chief economist Bill Adams, however, said Thursday that conditions may be looking up.

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"While inflation continued to overshoot the Fed's target in January, fundamental drivers of inflation are starting to improve," he said in a note. "Remember, a big part of the surge in prices was from shortages, and the economy is making big strides to reduce shortages."

Tech stocks plummeted as a result of the rising yields as Adobe stock fell 5.12%, e-commerce company Shopify fell 3.38% and Microsoft dropped 2.84%.

Thursday also saw the Labor Department report new unemployment filings declined last week by about 16,000 claims to 223,000.

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