The Dow Jones Industrial Average fell 208 points after the Labor Department released its consumer price index, showing inflation rose at the highest rate since November 1981. File Photo by John Angelillo/UPI | License Photo
U.S. markets declined for the third straight session Wednesday as investors weighed a key inflation report.
The Dow Jones Industrial Average fell 208.54 points, or 0.67%, while the S&P 500 declined 0.45% and the Nasdaq Composite closed down 0.15%.
The declines came as the Labor Department’s consumer price index report showed that prices increased 1.3% last month from the month before — adding to the year-over-year increase of 9.1%, the most since November 1981.
Capital Economics senior U.S. economist Michael Pearce said that the report confirmed that the Federal Reserve would need to hike its interest rates by 75 basis points again in its July meeting.
“While some will draw parallels with the shockingly bad May CPI report, the backdrop is markedly different — commodity prices have fallen sharply and we’ve seen clearer signs of an economic slowdown, both of which will contribute to weaker price pressures ahead,” Pearce said.
Wednesday’s CPI report also magnified concerns of a possible recession, which Liz Ann Sonders of Charles Schwab called “an inevitability.”
“There’s no spinning this, other than the Fed has to get more aggressive near term and crush demand,” said Sonders. “That cements a recession now.”
The 10-year treasury yield rose as high as 3.04% after the CPI report before ultimately retreating, while the two-year yields rose as high as 3.17%.
The inversion of the yield curve — when yields on shorter-dated treasuries rise above those of longer-dated ones — also typically indicates a recession.
Stocks fluctuated Wednesday, with Domino’s Pizza gaining 2.5%, Bath & Body Works rising 2.09% and Tesla stock increasing 1.7%, while UnitedHealth Group fell 2.7%, Boeing declined 2.17% and Walgreens slid 1.92%.
Tech stocks bounced back Wednesday with shares of Twitter rising 7.9% after it sued billionaire Elon Musk for backing out of a deal to purchase the social media company. Meanwhile, Netflix stock rose 1.21% and Amazon gained 1.08%.
Conversely, travel stocks continued to decline, with American Airlines falling 3.11% and United Airlines sliding 0.84%, while Royal Caribbean stock dropped 2.17% and Carnival slid 1.42%.
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