Wall Street collapses after red-hot inflation data; Nasdaq down 1.58%

At 09:37 am, the Dow Jones Industrial Average was down 261.12 points, or 0.84%, at 30,720.21, the S&P 500 was down 42.68 points, or 1.12%, at 3,776.12, and the Nasdaq Composite was down 177.55 points, or 1.58 points. %, at 11,087.17.

More than 90% of the S&P 500 companies were in the red as the biggest jump today consumer prices The peak of inflation that has been discovered since 1981 may still be out of reach.

The decline issues to a 5.37-to-1 ratio on the NYSE and to a 5.23-to-1 ratio on the Nasdaq.

The S&P index posted a new 52-week high and 39 new lows, while the Nasdaq posted two new highs and 136 new lows.

A Labor Department report showed the Consumer Price Index (CPI), which tracks the prices urban consumers spend on a basket of goods, increased by 1.3% and 9.1%, respectively, on both a monthly and yearly basis in June. Hui.

Economists polled by Reuters had forecast a 1.1% increase in the monthly CPI and an 8.8% increase in the annual figure. The so-called “core” CPI, which excludes volatile food and energy prices, rose 5.9% year-on-year, higher than forecast.

“Higher-than-expected inflation simply means the Fed will have to continue raising policy rates,” said Dave Gresek, managing director of investment strategy and research at Aspirant.

“The Fed has been very clear in terms of expressing the expectation that they will continue to push short-term rates faster, so it doesn’t really change much. If we look at a couple of months at most—expected inflation, which could change the course of the Fed.”

40 years of high inflation strengthened the case for an interest rate hike of 75 basis points later this month. Investors now expect the terminal rate at 3.60% by December 2022, up from 3.41% before the data.

As central banks move to raise borrowing costs to seal fast-rising inflation, fears of an economic downturn have risen, which triggered one of Wall Street’s worst sales in decades in the first half of the year. Delivered.

US Treasury yields jumped after data that comes ahead of second-quarter earnings reports from JPMorgan Chase & Co and Morgan Stanley on Thursday.

Their report will provide an early glimpse of how companies are coping with rising costs, with investors looking closely at profit forecasts to gauge the likelihood of a slowdown.

Comments on CPI

“The June CPI release was an ugly print, not getting around it,” said Cliff Hodge, chief investment officer at Cornerstone Financial. The Fed has no choice but to pursue a more aggressive path, which increases the likelihood of the next recession. . year.”

“Clearly we’re not out of the inflation jungle yet,” said Mike Lowengart, managing director of investment strategy at Morgan Stanley at E*Trade. “An increase of another three-quarters of a percent from the Fed is largely a foregone conclusion at this point, and we expect a bumpy ride in the market.”

Richard Flynn, managing director of Charles Schwab UK, said: “The only option available to the Fed is to slow economic growth to meet limited supply to reduce domestic demand – potentially driving the US into recession.”

Seema Shah, chief global strategist at Principal Global Investors, said: “Inflation is heating up, defying expectations of a peak. We see rates rising to 4.25% next year as the Fed recovers from its previously misguided inflation.” Makes a dire effort of reading.”

Neil Birrell, chief investment officer at Premier Miton Investors, said, “Every month we wait for it to peak and are getting frustrated. Core inflation is the root of the problem, and it will likely be driven by a 75 bps move by the Fed in the next. confirms.” meeting.”

Economists at Bank of America Corp forecast a “mild recession this year” in the US, saying services spending is slowing and high inflation is pushing consumers to pull back. Economists expect US GDP to decline 1.4% from a year in the fourth quarter. First, it was followed by an increase of 1% in 2023.

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