The U.S. stock market broke a streak of five consecutive months of gains in April, reigniting concerns about the impact of rising inflationary pressures and the potential for a prolonged restrictive monetary policy by the Federal Reserve.

Despite positive signals from first-quarterearnings reports, all major U.S. indices ended the month in negative territory as macroeconomic fears hit risk sentiment.

The S&P 500, as tracked by the SPDR S&P 500 ETF Trust SPY, closed 4% lower, snapping a five-month winning streak and marking its worst performance since September 2023.

The tech-heavy Nasdaq 100, monitored through the Invesco QQQ Trust QQQ witnessed a 4.4% decline for the month, similarly snapping a five-month positive streak and hitting the worst monthly return since September 2023.

Blue chip stocks in the Dow Jones, as tracked by the SPDR Dow Jones Industrial Average ETF DIA, fell 4.9% on the month, marking its lowest performance since September 2022.

Chart: April Snaps A 5-Month Winning Streak For Major US Averages

Inflation Fears Overshadow Positive Earnings Trends

With nearly half of S&P 500 companies reporting first-quarter 2024 results, 77% of companies revealed a positive EPS surprise, and 60% reported a positive revenue surprise.

However, March’s inflation reports delivered a stark reality check to investors.

The latest Consumer Price Index (CPI) report from the Bureau of Labor Statistics showed a surge in price pressures from 3.2% year-on-year in February to 3.5% in March 2024, surpassing forecasts of a 3.4% increase.

Another blow came from the Bureau of Economic Analysis’ Personal Consumption Expenditure (PCE) price index report, the Fed’s preferred inflation gauge.

Annual PCE inflation rose from 2.5% in February 2024 to 2.7% year-on-year in March, exceeding forecasts of a 2.6% increase. Additionally, core PCE inflation, which excludes energy and food items, surpassed predictions (2.8% vs. 2.6%).

The policy-sensitive 2-year Treasury yields closed the month above the 5% mark, reaching the highest levels since Nov. 13, 2023.

Read Now: Is Hawkish Shift On Inflation Imminent? Wall Street Analysts, Traders Brace For Fed Impact

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