U.S. stocks end lower in choppy session after data shows inflation running hottest since 1981

What drove markets

U.S. consumer prices rose 1.2% in March, the Labor Department reported on Tuesday. Year over year, prices rose 8.5% — the fastest pace since January 1982.

But the news that initially cheered investors was that core price growth slowed to a 0.3% monthly rise versus expectations for a 0.5% increase. That still nudged the year-over-year rate to a 40-year high of 6.5%.

Analysts said the core reading was somewhat encouraging but cautioned against reading too much into it.

“The best you can say is that core CPI came in lower than expected at ‘only’ 6.5%,” said Matt Peron, director of research at Janus Henderson Investors. “That might give some relief to markets which were preparing for the worst.”

See: Torrid inflation, now at 8.5%, ignites further debate in markets over where U.S. goes from here

The key, he said, is whether inflation has peaked and, if so, how fast it will decline. “While this reading probably locks in a more aggressive Fed action near-term, there is some reason to believe that CPI will decline enough by year-end to avoid the most severe Fed action.”

Read: Inflation in March ran hotter than expected. Here’s the good news.

The yield on the benchmark 10-year Treasury
BX:TMUBMUSD10Y,
which on Monday reached a three-year high, dropped 5.5 basis points to 2.724%. The surge in yields has been making stocks less attractive on a relative basis and has weighed in particular on technology and other so-called growth shares whose valuations are based on earnings and cash flow far into the future.

A rebound by oil futures also accelerated in the afternoon, with the U.S. benchmark
CL
jumping 6.7% to close at $100.60 a barrel.

Investors were also awaiting the unofficial kickoff of corporate earnings reporting season on Wednesday, with results due from JPMorgan Chase & Co.
JPM,
while other big Wall Street banks were due to report on Thursday.

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Companies in focus

• Shares of CarMax Inc.
  KMX
  fell 9.5% after the used-car retailer missed fiscal fourth-quarter profit estimates, offsetting a revenue beat.

How other assets traded

• The ICE U.S. Dollar Index
  DXY,
  a measure of the currency against a basket of six major rivals, rose 0.4%.

• Gold futures
  GC00
  rose 1.4%, to settle at $1,976.10 an ounce, extending its winning streak to four sessions.

• The Stoxx Europe 600
  XX:SXXP
  fell 0.4%, while London’s FTSE 100
  UK:UKX
  declined 0.5%.

• The Shanghai Composite
  CN:SHCOMP
  rose 1.5%, while the Hang Seng Index
  HK:HSI
  rose 0.5% in Hong Kong and Japan’s Nikkei 225
  JP:NIK
  slumped 1.8%.