Wall Street stocks fell after inflation hit a 40-year high

Stock markets plunged deeper into the red on Friday after data showed U.S. inflation hit its highest level in more than 40 years in May, far exceeding analysts’ expectations.

On Wall Street, stocks were deep in negative territory after US government data showed inflation hit 8.6% in the 12 months to May, the biggest rise in consumer prices since December 1981, due to soaring energy and food prices.

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The S&P 500 fell 2.9%, closing its ninth losing week in the past 10.

The data was eagerly awaited as investors eagerly search for clues on the direction of US interest rates at next week’s Federal Reserve meeting.

“The market was expecting us to see inflation at least plateauing or flattening, but it looks like inflationary pressures are continuing to build and we have seen further amplification of price pressures,” said Shaun Osborne, foreign exchange specialist at Scotiabank.

“So it seems more entrenched, more sticky, a price or inflation situation,” he added.

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Osborne said the report will encourage investor debate over whether the U.S. central bank will move to a 75 basis point interest rate hike next week instead of the planned half-basis increase. point.

But Osborne thinks the Fed will go with its original plan, considering a larger increase would seem “freakish”.

Adding to the unease was the news that Chinese authorities had again locked down millions of people for Covid tests due to a new surge in cases, dealing a blow to hopes of an economic reopening.

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“Warning signs for the economy emerge as weekly jobless claims (in the US) start to rise, the Covid situation in China will prove troublesome for supply chains over the next two quarters , and as inflationary pressures widen and show no signs of easing,” said Edward Moya, analyst at OANDA trading group.

“It looks like cuts to global growth forecasts will become a recurring theme over the coming months and that should complicate the additional tightening we’re seeing from central banks,” he said.

The World Bank and the Organization for Economic Co-operation and Development each lowered their forecasts for global economic growth in 2022 this week.


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Post expires at 10:38am on Tuesday June 21st, 2022