[ad_1]
Text size
The stock market was sinking after inflation came in hotter-than-expected in June.
Dow Jones Industrial Average
futures have dropped 352 points, or 1.1%, while
S&P 500
futures have fallen 1.5%, and
Nasdaq Composite
futures have slumped 2.1%.
Inflation rose 9.1%, beating forecasts for 8.8%, while core CPI rose 5.9%, topping estimates for 5.7%. That wasn’t just hotter than expected, but far hotter than expected.
With inflation running so hot, the question now turns to just how much the Federal Reserve will have to raise rates to bring it under control. there’s now a 31% chance that the central bank raises rates by a full percentage point at the July FOMC meeting, up from 7.6% one day ago.
“Overall, this was another stronger-than-expected print similar to May’s data and investors will be eagerly awaiting any sign that the Fed will seek to step-up the pace of hikes yet again,” writes BMO Capital Markets’ Ian Lyngen.
The more the Fed has to raise interest rates, the more likely the U.S. economy will slip in to a recession, something the financial markets are starting to reflect. The 10-year Treasury yield jumped 0.093 percentage point to 3.047%, but the 2-year yield climbed 0.137 percentage point to 3.18%, deepening the “inversion” of the yield curve. The longer the two-year yield stays above the 10-year, the more likely a recession is on its way.
“The higher the number, the more the Fed wants to raise rates to fight it,” NatAlliance Securities’ Andrew Brenner wrote before the release. “The more the Fed wants to raise rates, the faster the market builds in a recession.”
The number was so strong that the euro and dollar finally hit parity on the assumption that the Fed will keep raising rates, while the European Central bank will be slower to react.
Here are stocks on the move Wednesday:
Novavax
(ticker: NVAX) climbed 2.1% following a report from Politico that the Food and Drug Administration is poised to authorize the company’s two-dose Covid-19 vaccine for adults as early as today.
Google parent
Alphabet
(GOOGL) slipped less than 1%. The tech giant’s CEO Sundar Pichai told employees on Tuesday that the group plans to slow hiring for the rest of the year.
Unity Software
(U) stock dropped 6.7% after the company announced it is buying IronSource (IS) for $4.4 billion in all stock. IronSource gained 69%.
Delta Air Lines
(DAL) stock fell 2.9% after the company reported a profit of $1.44 a share, missing estimates of $1.73 a share, on sales of $13.8 billion, above expectations for $13.6 billion.
Twitter
(TWTR) has risen 1.9% after filing a lawsuit seeking to force
Tesla
CEO Elon Musk to consummate his deal to buy the company.
Write to Jack Denton at [email protected]
[ad_2]
Source link