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Stocks tumble as surging prices rattle markets

People walk past the New York Stock Exchange on Wall Street on May 10, 202 in New York City. - Wall Street stocks were mixed early May 10, 2021 ahead of key consumer price and retail sales data expected to influence the outlook for US monetary policy. Major stock indices closed at records Friday following a disappointing April jobs report that bolstered expectations the Federal Reserve will keep interest rates low for a long period of time to support the economic recovery. (Photo by Angela Weiss / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)

(CNN) — U.S. stocks sold off Tuesday and the Dow briefly tumbled more than 600 points, as investors grow increasingly concerned about raw material price spikes, shortages and inflation.

Prices are rising all over the place as commodities, shipping costs and more related categories become more expensive. The shortages and global supply issues have been lurking in plain sight for months, but these worries are really weighing on stocks Tuesday.

“Although we are coming off a record earnings season, continued supply chain and labor shortages are adding to potential inflationary pressures,” said Ryan Detrick, chief market strategist for LPL Financial.

The price jumps affect broader measures of inflation, which in turn could force the Federal Reserve to change its monetary policy stance sooner than expected. For now, the central bank’s interest rates are ultra-low and it buys billions of dollars worth of assets every month. But eventually that will change, and a prolonged increase in inflation could bring about that shift.

So far, Fed Chairman Jerome Powell has been steadfast in his view that it’s too early to talk about policy changes as both labor market improvements and higher inflation over the medium term would have to happen first.

But the employment situation is improving slowly but surely. Tuesday data showed March job openings rose to 8.1 million, the highest number recorded since the government started tracking that metric in December 2000.

So investors are worried — and tech stocks were hit hardest by the inflation fears during Tuesday’s session. By the time of the closing bell, however, the Nasdaq Composite had recouped some of its losses and closed down only 0.1%.

The Dow closed down 1.4%, or 474 points, after tumbling as much as 667 points earlier in the session. The broader S&P 500 finished 0.9% lower.

The weakness wasn’t confined to the stock market, either.

“The U.S. dollar is trading defensively, alongside weaker stocks and declining major bond markets as investors appear to be in ‘sell (almost) everything’ mode ahead of tomorrow’s U.S. CPI [consumer price] figures,” wrote Scotiabank analysts Shaun Osborne and Juan Manuel Herrera in a note to clients.

U.S. inflation figures for March are due Wednesday morning.

The 10-year U.S. Treasury bond yield, which is a proxy for interest rate expectations, was flat at 1.62%. Meanwhile, the ICE U.S. dollar index was 0.1% at the time of the stock market close.

In the commodities world, U.S. oil prices fell earlier in the day but rose 0.8% to more than $65 at the time of the stock market close. Oil prices have been increasing following the Colonial pipeline hack over the weekend. Gold prices were down 0.2% at $1,833 an ounce.

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