Inflation at its highest level in 40 years | Wall Street ends sharply lower

(New York) The accelerated inflation in the United States in May caused a sharp decline in the New York Stock Exchange on Friday, with indexes posting their worst week since January.

Updated yesterday at 5:04 PM.

According to the final figures at the close, the Dow Jones Star Stock Index was down 2.73% to 3,1392.79 points. The technology-heavy Nasdaq fell 3.52% to 11,340.02 points.

The S&P 500, the most representative of the US market, lost 2.91% to 3,900.86 points.

Investors had a hard time absorbing the really disappointing US indicators, first of all the CPI inflation which during the month of May jumped 1% while analysts were betting on +0.7%.

Over the course of twelve months, consumer price increases rose to 8.6%, up from 8.3% in April, far from the “plateau” that politicians and analysts had been hoping for.

This is the highest level of price hike since 1981.

Not only did stocks fall, but the dollar rose sharply and bond yields rose.

Short- and long-term bond yields on US government bonds were close.

Interest rates on two-year T-bills jumped to their highest level since the end of 2007, at 3.06%. Similarly, 10-year bond yields are close to their 2018 peak of 3.15%.

“The CPI is much stronger than expected and the market has been hoping for stabilization but price pressures appear to be spreading,” said Sean Osborne, analyst at Scotiabank.

LBBW’s Carl Helling summed up: “High inflation, the Federal Reserve that will raise interest rates further and increase the risk of a slowdown in the economy, that’s what’s going on.”

The US central bank’s monetary committee meets next week and markets are already expecting a 50 basis point tightening of key interest rates, after a similar hike last month.

But in light of the price hike, more and more analysts are questioning whether the central bank won’t tighten the screws more aggressively by raising key interest rates by 75 points, a move very rare in recent history from the Fed.

“Markets are starting to weigh the risks of a 75 basis point rate hike next week, but I’m not sure because that might sound like a bit of a panic,” Osborne said.

Family morale deteriorates

While the US president has reacted bluntly that more efforts are necessary to fight inflation, Fed Chairman Jerome Powell promises to be under great pressure when he addresses the press on Wednesday after the FOMC meeting.

The concerns sparked by such a sharp rise in prices have certainly taken a toll on consumer confidence, which collapsed in June. The University of Michigan Consumer Sentiment Index hit an all-time low, dropping 14% from May to 50.2, a drop that surprised analysts.

All sectors of Standard & Poor’s ended in the red, especially non-core spending (-4.16%), information technology (-3.89%) and banking (-3.65%).

Netflix lost 5.10% to $182.94 after an unfavorable opinion from Goldman Sachs analysts who also downgraded game platform Roblox (-8.98%) as well as eBay (-5.16%).

The scramble has affected all the big names in technology, from Alphabet (-3.04% to $2,228.55), Google’s parent company, to Amazon (-5.60% to $109.65) and Meta. , the parent company of Facebook (-4.58%).

Travel sites and cruise lines drank the trophy, in the wake of higher fuel prices, with bookings down 7.59%, Expedia down 5.60%, and Royal Caribbean Cruises down 7.33%.

Digital document transfer startup Docusign, which has struggled since the end of restrictions, thawed radically Friday by nearly 25% after reporting poor results.

And Tesla announced that it closed down 3.12% at $696.69, after closing its three business division. Amazon divided its territory by 20 on Monday.

Toronto Stock Exchange

The S&P/TSX Composite Index on the Toronto Stock Exchange lost 289.07 points, or 1.4%, to end the session with 20,274.82 points.

In the currency market, the Canadian dollar was trading at an average price of 78.27 US cents, down from 79.09 US cents the day before.

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