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Dow plunges 800 points, S&P 500 posts worst week since January after inflation hits 40-year high

Stocks fell on Friday after a much-anticipated inflation report showed prices rising faster than expected and consumer sentiment hit an all-time high.

The Dow Jones Industrial Average lost 810 points, or 2.5%. The S&P 500 fell 2.7%, while the Nasdaq Composite fell more than 3%.

The sell-off was wide, with almost everyone in the Dow Jones 30 shares in the red. Falling stocks outnumbered rising ones on the New York Stock Exchange by about nine to one.

Apple fell 3.5%, while Microsoft and Dow, Inc. fell 4% and 5.6%, respectively. Salesforce fell 4% and Amazon more than 5%.

The drop in stocks means Wall Street is heading for another losing week. On Friday, the Dow was down 1.9%, on track for its 10th week of declines in the past 11 years. The S&P 500 and Nasdaq Composite were both down more than 2%, on pace for their ninth losing week in 10.

May’s consumer price index report hit its highest level since 1981, putting pressure on the stock market. The report showed prices rose 8.6% year-on-year and 6% excluding food and energy prices. Economists polled by Dow Jones expected year-over-year increases of 8.3% for the main index and 5.9% for the benchmark.

“It confirms some of the fears I’ve heard from investors this week,” said Lori Calvasina, head of US equity strategy at RBC Capital Markets. She said the inflation alarm had pushed stocks lower this week.

“Is that somehow forcing stocks to stay at the bottom of the range they were in? Maybe. I don’t think that’s enough to force him to new lows,” Calvasina added.

High inflation readings have raised concerns about a possible recession in the US economy among investors and the general public. June’s preliminary reading of the University of Michigan Consumer Confidence Index remained well below expectations, hitting a record low.

“It only reinforces the impact that the CPI figure has had on the consumer psyche. We can assume that it will have a negative impact on consumer spending in the future. It is a shocking figure, but it is what inflation does when it’s this hot,” said Peter Boockvar of Bleakley Advisory Group.

Traders appeared to be bracing for a more aggressive Federal Reserve in response to the price spike. The 2-year Treasury yield, considered one of the most sensitive to Fed rate hikes, jumped above 3% on Friday to its highest level since 2008.

Tech stocks were under pressure as investors grappled with higher rates and a potential recession. Netflix shares fell nearly 5% following a Goldman Sachs downgrade. Chip giant Nvidia slipped 6%.

Banks and cyclicals also fell, perhaps reflecting recession fears. Shares of Wells Fargo and Goldman Sachs fell more than 5%. Boeing fell 4.9%.

Stocks ended May with a rally from 2022 lows on speculation that the worst of inflation may be behind us, but Friday’s CPI report dashed those hopes. The S&P 500 is down about 19% from its all-time high and sits just 2% above the May low of the year.

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Post expires at 3:18pm on Wednesday June 22nd, 2022

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