Inflation is sinking the Wall: Dow 800 points lower, Nasdaq at -3.5%

LAST UPDATE: 20.15

Wall Street indexes widened their losses on Friday, with the Dow falling 800 points and the losses of the S&P 500 and Nasdaq exceeding 2.8%, as investors worried after the announcement of new inflation data – which showed a larger-than-expected rise in May – that the US Federal Reserve will have to keep pushing the “brake” to tame the inflation rally.

The investment climate was also aggravated by the University of Michigan Consumer Confidence Index, which fell sharply to a record low of 50.2 points for June from 58.4 in May.

In particular, o US inflation in May climbed on new high 40 yearsraising the chances of the Federal Reserve launching more aggressive interest rate hikes in the coming months in a bid to curb prices.

THE consumer price index increased by 8.6% compared to a year earlier, after rising 8.3% last month, according to the US Department of Commerce. This is the highest level of inflation since 1981.

From last month, the index increased by 1%exceeding analysts’ estimates that expected it to increase by 0.7% according to a Wall Street Journal poll.

THE structural indicatorexcluding energy and food, rose 0.6% month-on-month and 6% year-on-year, slowing slightly from 6.2% the previous month.

Alongside, Americans’ expectations for inflation the following year they jumped to 5.4% in June from 3.3% in May, while for the next 5 years they increased to 3.3% from 3% the previous month. This is the highest level since 2008, says Katie Jones, strategic analyst at Charles Schwab.

According to the report, the consumer opinion index for the current situation fell to 55.4 in June from 63.3 last month, while the barometer of their expectations fell to 46.8 from 55.2.

The fact that inflation remains on an upward trajectory frightens investors about the Fed’s aggression in the interest rate hike that has begun.

The Federal Reserve has already raised its key interest rate by 0.75% and two more increases of 0.5% each in the next two sessions, next week and in July, are considered a given.

“One can easily see the scenario where supply shocks will continue to push inflation to higher levels, despite the Fed tightening monetary policy,” Nancy Davis, founder of Quadratic Capital Management, said in an e-mail.

“A stagnant environment is negative for investment. Stocks and bonds are falling at the same time and the supposedly all-weather 60/40 portfolio is not ready for stagnant inflation,” she said.

His performance 10-year US government bond gained 6.5 basis points at 3.138%, the highest level since May 11, as the European Central Bank announced on Thursday that it was ending its bond-buying program and preparing to raise interest rates. The ECB has confirmed that it intends to raise interest rates by 25 basis points in July and possibly again in September. In the meantime dollar is currently up 0.9%.

Indicators – Statistics

On the dashboard, the industrial Dow loses 2.5% or 807 points at 31,510, the broadest index S&P 500 falls by 2.77% to 3,905 points, while the biggest losses are recorded by the technologically weighted Nasdaq which plunges by 3.5% to 11,345 points.

From 30 shares that make up the Dow only Walmart resists and remains on positive ground. Salesforce is down more than 5% and is at the bottom, while 4 shares are losing more than 4%: Goldman Sachs, Boeing, Dow Inc and JPMorgan. while Apple is also close, losing 2.76%.

Goldman Sachs downgraded the securities of a number of internet companies to “sell”, a fact that puts a lot of pressure on these shares. Thus, Netflix Inc. moves to -4.78%, Roblox Corp. falls by about 8.9% and eBay is down 4.5%. Frontdoor Inc. also declined and lost 5.2%.

DocuSign Inc. collapses with a fall of about 25%, after the electronic documents company failed to achieve the estimated profits of the first financial quarter of the financial year.