US stocks fell on Wednesday after higher-than-expected inflation data fueled fears that the Federal Reserve could take a more aggressive stance on interest rate hikeswhich could lead the economy to a recession.
The S&P 500 it fell 0.5%, after falling as much as 1.6% previously. The Nasdaq gave up 0.2% and erased almost all of the initial 2.1% loss. Stocks flipped several times throughout the day, as is customary on Wall Street in this tumultuous year. The Industry Average Dow Jones fell 0.69 percent.
They followed the example of the Treasury yields in the bond market, which initially soared on expectations that the Federal Reserve would raise interest rates sharply to curb the country’s soaring inflation.
US consumer prices accelerated in June because the costs of Gasoline and the foods remained elevated, the data showed, resulting in the biggest annual rise in inflation in 40 1/2 years and cementing the case for the Federal Reserve to raise interest rates.
“When you look at the data, a lot of it is energy prices. So if you go back, inflation was starting to slow in other areas, which is what the Fed wants to see,” he said. Dennis Dickowner operator of Bright Trading LLC in Las Vegas. “I think (markets) are saying that this June data was the peak of inflation and it’s only going to get better from here.”
“For four or five months, we have had a spike in inflation and it has constantly disappointed us”said John Lynch, chief investment officer at Comerica Wealth Management.
“The Fed’s shock and awe could do a lot of collateral damage to the economy without really providing short-term inflation relief,” he said. Brian Jacobsensenior investment strategist at Allspring Global Investments. “The Fed probably needs to temper people’s expectations of what it can do”said.
The rise in world prices has pushed central banks to increase borrowing costs this year, raising concerns that a reversal of decades-old easy-money policies could lead to a sharp economic downturn.
Fed policy rate futures traders quickly priced in a probability of more than 50% of an increase of 100 points basics at the next meeting, according to CME Group’s Fedwatch tool, up from a 7.6% chance the day before. Expectations for a 75 basis point rate hike were lowered to 46.5%.
(With information from AP and Archyde.com)
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