Stocks Sink As April Inflation Data Shows Jump Of 4.2%

Plus, the national average for gas jumped above $3 per gallon as the Colonial Pipeline remains mostly offline, Domino’s Pizza shares jump as Bill Ackman revealed 6% stake in the chain, and Wendy’s delivered an earnings beat.

Stocks were lower at the open on Wednesday with the Dow falling by 63 points, or 0.2%. The S&P 500 dropped 0.5%, while the Nasdaq traded 1.3% lower.

Stocks dropped this morning as key inflation data showed higher-than-expected price pressures. The Labor Department reported that inflation accelerated at its fastest pace in more than 12 years in April as the U.S. economy kicked into high gear and energy prices jumped higher. The Consumer Price Index rose to an annualized rate of 4.2% last month, while economists had expected an increase of 3.6%. “Transitory pandemic influences clearly contributed to the surprise but there’s residual firmness in core inflation that’s hard to ignore,” said Michael Gapen, chief U.S. economist at Barclays Plc, adding that beyond the pandemic reopening effect, “there was still some residual firmness that suggests risks around inflation in the near term are still skewed to the upside.”

The national average for gas has jumped above $3 per gallon for the first time since 2014 amid growing shortages of fuel across the South and East as much of the crucial Colonial Pipeline remains offline. The pipeline’s operating company said it expects to make a decision today on whether to restart flows of oil products, however it is likely it would still take several days for the pipeline to return to normal operations. “If they bring it back on, everything’s working correctly, that’s a big, huge, massive undertaking,” said David Alexander, president of J.T. Alexander & Son, a North Carolina gas distributor. “They’ve never shut the whole thing down before, so surely they’ll have problems here and there.” In the meantime, Florida, Georgia, Virginia, and North Carolina have all declared states of emergency, while Georgia has temporarily suspended its gas tax. 

Domino’s Pizza shares jumped as much as 4% this morning after Bill Ackman revealed a 6% stake in the chain. The billionaire hedge fund manager said his Pershing Square fund swapped its Starbucks stake for Domino’s shares amid a pullback in the stock. “We sold Starbucks,” Ackman said during the Wall Street Journal’s Future of Everything Festival. “It got to a price that it was hard to earn the excess return we like to earn. The stock just recovered too quickly.” Ackman added that for a brief moment, Domino’s shares “dropped dramatically in price for reasons we didn’t understand and we were able to swap Starbucks for Domino’s Pizza. We didn’t get as much as we would like but we own a little under 6%. … Domino’s is a pure franchising company and interestingly they were the first to invest in technology and delivery. They own their delivery infrastructure and they don’t need to rely on the DoorDashes of the world.”

Wendy’s also moved higher today after it delivered an earnings beat and raised its full-year guidance, boosted its dividend, and increased its share repurchase plan. The burger chain said it earned $41.4 million, or $0.18 per share, up from $0.06 in the same period the year prior, while revenue jumped 13.6$ to $460.2 million. “We are increasing our 2021 financial outlook meaningfully across all key financial metrics, driven by an outstanding first quarter that underscores our continued momentum and the overall strength of our business,” President and Chief Executive Officer Todd Penegor said in the earnings release. “The robust growth in our business continued in the first quarter of 2021 as sales significantly exceeded our expectations and fueled our restaurant economic model, leading to outsized profits. We remain committed to our three long-term growth pillars—significantly building our breakfast daypart, accelerating our digital business, and expanding our footprint across the globe—and continue to make great progress. I have never been more confident that we will achieve our vision of becoming the world’s most thriving and beloved restaurant brand as our System is stronger and more aligned than ever.”

And Virgin Galactic shares are down more than 9% again today after it was revealed that Ark Invest’s space exploration ETF sold nearly all of its remaining stake in the space tourism company. Cathie Wood’s firm sold its 293,962 shares of Virgin Galactic from its ARKX fund on Tuesday following after the company said that it had encountered another technical problem that could again delay this month’s planned test flight. ARKX held around 672,000 shares of Virgin Galactic in late March when it began trading, a position worth around $20 million at the time, and sold nearly half of its position on April 20 after the stock slipped below $23 as Jeff Bezos’ Blue Origin announced plans to launch the first crewed flight of its space tourism rocket on July 20, undercutting Virgin Galactic’s first-mover advantage.

Stocks We’re Watching

Shockwave Medical Inc (NASDAQ: SWAV): Shockwave Medical shares rose as much as 24.5% yesterday after the company reported first quarter earnings, posting a jump in revenue of 110% year-over-year to $31.9 million. “This quarter has been a highly productive one for Shockwave and I could not be more impressed by the achievements of our team and the support of our customers,” Doug Godshall, President and Chief Executive Officer of Shockwave Medical, said in an earnings release. “With the recent FDA approval of our Shockwave C2 device, followed by the proposed NTAP payment by CMS only eight weeks after approval, we are well positioned to continue to expand our reach in helping to treat patients with severely calcified arterial disease.”