U.S. stocks were dragged sharply lower on persistently hot U.S. inflation. The yield on the 10-year Treasury note rose to 3.156% from 3.041% on Thursday. The WSJ Dollar Index rose 0.71% to 96.74. Oil prices pulled back as the dollar jumped. And gold booked its best day in a week as investors headed for havens.
A fresh inflation shock hammered stocks anew, heightening investors’ fears that the Federal Reserve could be forced into more drastic action to tame surging consumer-price increases.
Declines hit across the board, with rising interest-rate expectations increasing worries about the possibility of the economy slipping into a recession. The Dow Jones Industrial Average fell around 2.7%. Technology shares slid along with banks and consumer shares, sending the S&P 500 down 2.9% and the Nasdaq Composite Index down 3.5%. All three indexes declined for a second-consecutive week.
“Given the high level of uncertainty with regards to the Fed’s path of interest-rate increases, it’s hard to pound the table and say buy stocks, ” said Erik Knutzen, chief investment officer of multiasset strategies at Neuberger Berman.
Earlier, in Asia, Japanese stocks ended lower, dragged by falls in chip-related stocks amid continued concerns about borrowing costs and slower growth. The Nikkei Stock Average fell 1.5%.
Chinese stocks closed higher on improved sentiment amid signals that Beijing may act to stabilize growth. The Shanghai Composite Index ended 1.4% higher, the Shenzhen Composite Index rose 1.9% and the ChiNext Price Index advanced 2.3% to 2556.47. Auto and consumer stocks were higher, supported by hopes of stronger demand. Among consumer stocks, snack maker Three Squirrels rose 0.5% and Chinese liquor maker Kweichow Moutai advanced 2.6%.
Elsewhere, New Zealand’s NZX-50 index closed 0.7% lower and lost 2.5% for the week as the outlook for rising interest rates and slower global growth weighed on equity markets. Most sectors lost ground though some property stocks and utilities gained. Air New Zealand lost 4.8% despite trimming its full-year loss forecast to a maximum of NZ$750 million.
And Australia’s S&P/ASX 200 index closed 1.25% lower, tumbling to its heaviest weekly loss since April 2020 amid concerns about inflation globally. All 11 sectors fell as the benchmark index followed a negative lead from U.S. equities, which dropped after the European Central Bank outlined a plan to raise interest rates in July. The property-trusts sector led losses, falling 2.9% amid worries over the impact of rising rates on real-estate markets. The energy sector, which has soared recently on higher wholesale prices, shed 1.6%.
Oil futures turned lower, erasing early gains after a much hotter-than-expected U.S. May inflation report sent the dollar higher and sank equities.
West Texas Intermediate crude for July delivery fell 0.7% to $120.67 a barrel on the New York Mercantile Exchange, trimming its weekly gain to 1.5%. August Brent crude, the global benchmark, was down 0.9% at $122.01 a barrel on ICE Futures Europe, leaving it with a 1.9% weekly gain.
Weakness for crude, however, was relatively subdued, said Edward Moya, senior market analyst for the Americas at Oanda, in a note. “Some traders are entering de-risking mode as prospects for the economy continue to dim, but no one really wants to abandon the best trade of the year, which is oil and energy stocks,” he said.
Gold prices closed higher as investors turned to safe havens following a hotter-than-expected reading on U.S. May inflation numbers, but not before briefly tumbling to their lowest levels in three weeks early in the session.
August gold surged 1.2% to settle at $1,875.50 per ounce, marking the highest settlement for the most-active gold contract since May 5, according to FactSet data.
“Ordinarily, the pattern has been that a strong dollar – like today – and when bond yields are up, you have less support for gold,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “Today, the opposite is happening because of the real ugly inflation data we got.”
TODAY’S TOP HEADLINES
Fed Likely to Signal Half-Point Rate Rises Through September After Inflation Report
Another high inflation report is likely to lead more Federal Reserve officials to anticipate a fourth consecutive half-percentage-point rate rise will be warranted at their meeting this September.
The Fed has already indicated it will raise rates by a half point at its meeting next week and that it is very likely to do so again in July. Officials have said that they would continue to raise rates at that pace if inflation doesn’t show signs of a convincing slowdown.
The Labor Department reported Friday that the consumer-price index rose 8.6% in May from the same month a year ago, pushing inflation to a new 40-year high. Rising fuel prices and supply-chain disruptions from Russia’s war against Ukraine have sent prices up in recent months.
U.S. Inflation Hit 8.6% in May
U.S. consumer inflation reached its highest level in more than four decades in May as surging energy and food costs pushed prices higher, with little indication of when the upward trend could ease.
The Labor Department on Friday said that the consumer-price index increased 8.6% in May from the same month a year ago, marking its fastest pace since December 1981. That was also up from April’s CPI reading, which was slightly below the previous 40-year high reached in March. The CPI measures what consumers pay for goods and services.
Tesla Plans 3-for-1 Stock Split, Joining Other Big Tech Companies
Tesla Inc. plans a 3-for-1 stock split, joining other technology companies with lofty share prices that have taken such a step to make ownership more accessible to individual investors.
The electric-car maker on Friday detailed the plan in a regulatory filing ahead of its planned Aug. 4 annual shareholder meeting. Tesla in March said it would seek shareholder approval for a stock split at that gathering, but at the time didn’t provide details.
America’s largest auto maker by market value said in the disclosure it would ask shareholders to approve the company issuing 4 billion more shares. Tesla is currently authorized to issue 2 billion shares. As of March 31 the company had around 1.04 billion shares outstanding.
Meta Scrutinizing Sheryl Sandberg’s Use of Facebook Resources Over Several Years
The lawyers investigating Facebook operating chief Sheryl Sandberg’s use of corporate resources are examining behavior going back several years, said people familiar with the matter, focusing on the extent to which staffers worked on her personal projects.
A number of employees have been interviewed as part of the investigation by Facebook parent Meta Platforms Inc., the people said, adding that the review has been under way since at least last fall.
Cosmetics Maker Revlon Nears Chapter 11 Filing
Revlon Inc. is preparing to file for chapter 11 protection as soon as next week after struggling to keep up with competition from newer cosmetic brands, people familiar with the matter said.
Revlon, which has struggled with the increasing popularity of new brands from social-media influencers such as Kylie Jenner and others, narrowly escaped bankruptcy in 2020 as masked-up, stuck-at-home consumers cut back on makeup and accessories during the pandemic.
The company, owned by billionaire Ron Perelman’s MacAndrews & Forbes, has been in talks with top-ranking lenders ahead of debt maturities that begin next year.
Expected Major Events for Monday
21:00/NZ: May REINZ Monthly Housing Price Index
21:00/NZ: May REINZ Residential Market Report
22:45/NZ: May Food Price Index
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
June 12, 2022 16:30 ET (20:30 GMT)