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US STOCKS-Wall St falls sharply as inflation data fuels jitters

reuters.com · 06/10/2022 14:47
US STOCKS-Wall St falls sharply as inflation data fuels jitters

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Consumer price index rose to 1% in May from 0.3% in April

Netflix falls after Goldman Sachs downgrades to 'sell'

Indexes drop: Dow 2%, S&P 500 2.3%, Nasdaq 2.9%

Updates to late afternoon, adds NEW YORK dateline, changes byline

By Caroline Valetkevitch

- All three major U.S. stock indexes were down at least 2% in Friday afternoon trading as a steeper-than-expected rise in U.S. consumer prices in May fueled investor worries about more aggressive interest rate hikes by the Federal Reserve.

Growth stocks led the decline, with Microsoft Corp MSFT and Apple Inc AAPL the biggest weights on the S&P 500 and Nasdaq.

Benchmark 10-year U.S. Treasury yields US10YT=RR reached 3.152%, the highest since May 9 following the inflation report.

The Labor Department's report showed the consumer price index increased 1.0% last month after gaining 0.3% in April. Economists polled by Reuters had forecast the monthly CPI picking up 0.7%.

Year-on-year, CPI surged 8.6%, its biggest gain since 1981 and following an 8.3% jump in May. nL1N2XX118

Stocks have been volatile this year, and recent selling has largely been tied to uncertainty over the outlook for inflation and rates.

"Inflation this past month was certainly hotter than expected and a reminder that inflation will be with us for longer than we previously expected," said Michael Sheldon, chief investment officer at RDM Financial Group at Hightower in Westport, Connecticut.

"But there are some signs within the economy that ultimately inflation should start to slow, and the Fed will likely do whatever it takes to keep raising rates and reduce inflation over the coming 12 to 18 months."

The Dow Jones Industrial Average .DJI fell 658.3 points, or 2.04%, to 31,614.49; the S&P 500 .SPX lost 91.06 points, or 2.27%, to 3,926.76; and the Nasdaq Composite .IXIC dropped 342.63 points, or 2.91%, to 11,411.60.

All three major indexes are expected to be down for the week as well.

Goldman Sachs said on Friday that it now expects the Fed to hike rates by 50 basis points in September, up from its previous expectation of a 25 basis point increase.

Netflix Inc NFLX slid 4.5% after Goldman downgraded the streaming giant's stock to "sell" from "neutral" due to a possibly weaker macro environment. nL4N2XX1UD

Declining issues outnumbered advancing ones on the NYSE by a 6.46-to-1 ratio; on Nasdaq, a 4.38-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and 44 new lows; the Nasdaq Composite recorded 13 new highs and 308 new lows.


(Additional reporting by Devik Jain, Mehnaz Yasmin and Shreyashi Sanyal in Bengaluru; Editing by Arun Koyyur, Aditya Soni and Jonathan Oatis)

((caroline.valetkevitch@thomsonreuters.com))