NEW YORK (AP) — Early gains on Wall Street were clouded Wednesday after the government reported that rising gas, food and rent prices propelled U.S. inflation to a new four-decade high. June, which probably sealed the case for another big hike in interest rates. by the Federal Reserve.
Dow Jones industrial average and S&P 500 futures, pointing to gains just minutes before the report’s release, turned sharply lower after the Labor Department report showed consumer prices spiked 9 percent. .1% compared to the previous year.
Dow Jones Industrial Average futures fell 1.1% and S&P 500 futures fell even more, down 1.5%.
The jump in consumer prices was the biggest 12-month increase since 1981, surpassing the 8.6% jump in May. On a monthly basis, prices rose 1.3% from May to June, another substantial increase, after prices rose 1% from April to May.
US inflation rose as the economy recovered from the coronavirus pandemic and some investors and economists fear that the Fed’s response (a half-point increase in its benchmark rate in May and a three-point quarters last month) cool down the economy too quickly. and send the country into a recession.
Michael Pearce, a senior US economist at Capital Economics, expects the Fed to raise its main lending rate by another three-quarters of a point when it meets later this month.
“While some will draw parallels to the surprisingly bad May CPI report, the context is markedly different: commodity prices have fallen sharply and we have seen clearer signs of an economic slowdown, both of which will contribute to further price pressures. weak in the future,” Pearce said.
The Russian invasion of Ukraine has exacerbated the problem, driving up the prices of oil and other commodities. Global manufacturing supply chains have been disrupted by Chinese efforts to contain virus outbreaks that temporarily shut down Shanghai and other industrial hubs.
The US bond market is giving off warning signs of a possible recession.
The 10-year Treasury yield, or the difference between the market price and the payment at maturity, was 3.06%. It is just below the two-year Treasury yield, indicating that some investors expect a recession in the next year or two.
In midday trading, London’s FTSE 100 lost 1.2%. Frankfurt’s DAX sank 1.9% and Paris’s CAC 40 slumped 1.8%.
In Asian trade, the Shanghai Composite Index gained less than 0.1% to 3,284.29 after June exports rose 17.9% and imports rose just 1% in a sign of weak demand. Tokyo’s Nikkei 225 added 0.5% to 25,478.77 while Hong Kong’s Hang Seng sank 0.2% to 20,797.95.
Seoul’s Kospi added 0.5% to 2,328.61 after South Korea’s central bank raised its policy rate by an unprecedented 0.5 percentage point to 2.25% to cool rising interest rates. prices.
Sydney’s S&P-ASX 200 gained 0.2% to 6,621.60 and India’s Sensex gained 0.6% to 53,591.66.
New Zealand advanced after the country’s central bank raised its benchmark interest rate by half a percentage point to 2.5%. Southeast Asian markets declined.
The S&P 500 lost 0.9% on Tuesday, falling for a third day. Technology, health care and energy stocks accounted for a large part of the losses. The Dow Jones Industrial Average fell 0.6% and the Nasdaq Composite Index lost 0.9%.
Large US companies are due to report second-quarter results in the coming weeks.
Expectations appear moderate. Analysts are forecasting 5.1% growth for S&P 500 companies, which would be the weakest since the end of 2020, according to FactSet.
Shares of Delta Air Lines fell about 3% after the airline reported Wednesday morning that it earned $735 million in the second quarter. Earnings per share fell short of Wall Street expectations, which the airline blamed on high fuel prices and more than 4,000 canceled flights in May and June.
“We had a tough six weeks,” CEO Ed Bastian said. “This is a company, this is an industry … none of us were up to the task.”
In energy markets, benchmark US crude lost $1.11 to $94.73 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $8.25 on Tuesday to $95.84. Brent crude, the base price for international trade, fell $1.06 to $98.43 a barrel in London. It fell $7.61 the previous session.
The dollar rose to 137.54 yen from 136.77 yen on Tuesday. The euro fell to $1.0026 from $1.0045.
Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.