Wall Street drops after Reuters’ red-hot inflation data

© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 11, 2022. REUTERS / Brendan McDermid

By Amruta Khandekar and Bansari Mayur Kamdar

(Reuters) – Wall Street’s main indexes fell on Wednesday after hotter-than-expected inflation data boosted bets that the U.S. Federal Reserve will raise interest rates aggressively to rein in rising prices. .

The Labor Department report shows that the Consumer Price Index (CPI), which tracks the price urban consumers spend on a basket of goods, rose in June on both a monthly and yearly basis, are 1.3% and 9.1%, respectively.

Economists polled by Reuters had forecast a monthly CPI increase of 1.1% and an annual figure of 8.8%. The so-called “core” CPI, which excludes volatile food and energy prices, was up 5.9% year-over-year.

“Higher-than-expected inflation means the Fed will have to keep raising policy rates,” said Dave Grecsek, managing director of investment strategy and research at Aspirant.

“The Fed has been pretty clear about communicating expectations that they’re going to keep raising short-term rates quickly, so this doesn’t really change too much. If we see a few more months of larger-inflation,” he said. expected, that could change the Fed’s course.”

40-year high inflation reinforces the case for a 75 basis point rate hike later this month. Investors now expect terminal interest rates at 3.60% in December 2022, up from 3.41% prior to the data.

As central banks ramped up borrowing costs to quell inflation, fears of a recession escalated, triggering one of Wall Street’s worst sell-offs in decades in the second half of the year. this early year.

US Treasury yields jump after data, ahead of second-quarter earnings reports from JPMorgan Chase & Co (NYSE:) and Morgan Stanley (NYSE:) on Thursday.

Their reports will provide a glimpse into how companies are dealing with rising costs, with investors also keeping a close eye on earnings forecasts to gauge the likelihood of a recession. .

At 09:37 a.m. ET, down 261.12 points, or 0.84%, at 30,720.21, down 42.68 points, or 1.12% at 3,776.12, and down 177, 55 points, or 1.58%, at 11,087.17.

Issues fell more than advancers by a ratio of 5.37 to 1 on the NYSE and 5.23 to 1 on the Nasdaq.

The S&P index recorded a 52-week high and 39 new lows, while the Nasdaq recorded two new highs and 136 new lows.

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