Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

S&P 500 Slumps as Surprise Jump in Inflation to Keep Fed on Rate Hike Trail

Published 06/10/2022, 02:55 PM
Updated 06/10/2022, 03:03 PM
© Reuters

© Reuters

By Yasin Ebrahim

Investing.com -- The S&P 500 fell sharply Friday as data showing inflation unexpectedly hit a fresh 40-year high is expected to keep the Federal Reserve leaning hawkish and scuppered hopes of a rate hike pause later this year.

The S&P 500 fell 2%, the Dow Jones Industrial Average slipped 2%, or 631 points, and the Nasdaq was down 2.7%.

The consumer price index rose 1% in May, above expectations for a 0.7% increase, taking the year-on-year consumer prices through May to 8.6%, its fastest rate since 1981 and above economists' forecasts of 8.3%.

In a worrying signal for the Fed, the factors pushing inflation above fresh 40-year highs are broadening beyond just supply-chain issues, with shelter, food and gas leading the gains.

“The Federal Reserve is committed to reducing demand to meet a supply-constrained world. This inflation reading will strengthen that resolve,” Yelena Maleyev, economist at Grant Thornton said in a note.        

Treasury yields jumped on bets that the Fed will be forced to deliver 50 basis points at each of the next three meetings, putting growth sectors of the market such as tech, which are vulnerable to rising rates, on the backfoot.

Apple (NASDAQ:AAPL), Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT), each down more than 3%, led the losses in big tech.

Consumer discretionary also led the deep slide in the broader market, led by travel and leisure stocks on fears that red-hot inflation will put a further squeeze on consumer spending.

Caesars Entertainment (NASDAQ:CZR), Royal Caribbean (NYSE:RCL), MGM Resorts (NYSE:MGM), and Booking (NASDAQ:BKNG) were among the biggest losers in the sector.

“The pace of consumer spending is going to slow, we've already seen that in the choices they are making,” Chief Strategist at Spouting Rock Asset Management Rhys Williams told Investing.com in an interview on Friday.

“There's been a few anecdotes that even on services like cruises, demand is down for next year,” Williams added. “People are a little bit shocked by how much things cost.”

Financials were driven lower by banks as the Treasury yield curve continued to flatten on bets of a potential recession ahead.  

Signature Bank (NASDAQ:SBNY), Capital One Financial (NYSE:COF), and Synchrony Financial (NYSE:SYF) slumped with latter, which is sensitive to cryptocurrency also suffering added pressure from a rout in crypto. 

Bitcoin fell more than 2%, while Ethereum fell more than 6% to a 52-week low.    

Latest comments

Meanwhile the companies are making more money than ever…smart move to sell?
Surprise? It Is going to get much much higher and Will stay High for years
expensive oil plus expectations of inflation are making the prices go higher
Inflation does not affect stocks, investors should know it...
Awe. Wrong!!! try again
like inflation just showed up like a surprise birthday party. seriously grow up.
Yasin, your article title ******lol
su.cks is a bad word? cmon
The only person surprised by the inflation numbers is the author of the article
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.