Stocks Plunge After Inflation Report

Market wanted to see a sign the worst of rising prices had passed
By Newser Editors and Wire Services
Posted Jun 10, 2022 3:56 PM CDT
Stocks Fall After Inflation Letdown
Traders Orel Partush, left, and Robert Charmak work on the floor of the New York Stock Exchange on Friday.   (David L. Nemec/New York Stock Exchange via AP)

Wall Street's shuddering realization that inflation got worse last month, not better as hoped, sent markets reeling on Friday. The S&P 500 sank 2.9% to lock in its ninth losing week in the past 10, and tumbling bond prices sent Treasury yields to their highest levels in years. The Dow Jones Industrial Average lost 2.7%, and the Nasdaq composite dropped 3.5%. Wall Street came into Friday hoping a highly anticipated report would show the worst inflation in generations slowed a touch last month and passed its peak, the AP reports. Instead, the US government said inflation accelerated to 8.6% in May from 8.3% a month before.

The S&P 500 fell 116.96 points to 3,900.86. Combined with its losses from Thursday, when investors were rushing to lock in final trades before the inflation report, it was the worst two-day stretch for Wall Street’s benchmark in nearly two years. The Dow lost 880.00 points to 31,392.79, and the Nasdaq tumbled 414.20 to 11,340.02. The Federal Reserve has already begun raising interest rates and making other moves in order to slow the economy, in hopes of forcing down inflation. Wall Street took Friday's reading to mean the Fed's foot will remain firmly on the brake for the economy, dashing hopes that it may ease up later this year.

"Inflation is hot, hot, hot," said Brian Jacobsen, senior investment strategist at Allspring Global Investments. "Basically, everything was up." The growing expectation is that the Fed to raise its key short-term interest rate by half a percentage point at each of its next three meetings, beginning next week. That third one in September had been up for debate among investors in recent weeks. Only once since 2000 has the Fed raised rates by that much, last month. "No relief is in sight, but a lot can change between now and September," Jacobsen said. "Nobody knows what the Fed will do in a few months, including the Fed."

(More stock market stories.)

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