HomeBusinessWall Street suffers biggest weekly loss since January after hot CPI data

Wall Street suffers biggest weekly loss since January after hot CPI data

  • The consumer price index rose from 0.3% in April to 1% in May
  • Netflix plummets after Goldman Sachs downgrade to ‘sell’
  • Indices: Dow Jones down 2.7%, S&P 500 down 2.9%, Nasdaq down 3.5%

NEW YORK, June 10 (Reuters) – U.S. stocks posted their biggest weekly percentage declines since January and ended sharply lower on Friday as a stronger-than-expected rise in U.S. consumer prices in May stoked fears of a a more aggressive interest rate hike by the Federal Reserve.

Technology and growth stocks, whose valuations depend more on future cash flows, led the decline. Microsoft Corp (MSFT.O), Amazon.com Inc (AMZN.O) and Apple Inc (AAPL.O) led losses in the S&P 500.

Following the inflation report, two-year Treasury yields, which are highly sensitive to rate hikes, climbed to 3.057%, the highest since June 2008. Benchmark 10-year yields rose to 3.178%, the highest since May 9.

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The US Department of Labor report showed the consumer price index (CPI) rose 1.0% last month after gaining 0.3% in April. Economists polled by Reuters had forecast the monthly CPI to rise 0.7%.

Year-over-year, the CPI jumped 8.6%, its biggest rise since 1981 and after jumping 8.3% in May. Read more

Equities have been volatile this year, and recent selling has been largely tied to concerns about inflation, rising interest rates and the likelihood of a recession.

“Today’s report should extinguish any pretense that a ‘pause’ in rate hikes will likely be appropriate by the end of the summer, as the Fed is clearly still behind in containing the inflation,” said Jason Pride, chief investment officer for private wealth at Glenmede in Philadelphia.

The Dow Jones Industrial Average (.DJI) fell 880 points, or 2.73%, to 31,392.79; the S&P 500 (.SPX) lost 116.96 points, or 2.91%, to 3,900.86; and the Nasdaq Composite (.IXIC) lost 414.20 points, or 3.52%, to 11,340.02.

The major indices posted their biggest weekly percentage declines since the week ended Jan. 21, with the Dow Jones down 4.58%, the S&P 500 down 5.06% and the Nasdaq down 5. 60% for the week.

The S&P 500 is now down 18.2% for the year so far.

On Friday, the S&P 500 Growth Index (.IGX) took a 3.7% hit, while the Value Index (.IVX) fell 2.2%.

The inflation report was released ahead of an anticipated second rate hike of 50 basis points from the Fed on Wednesday. Another half percentage point is expected for July, with a high probability of a similar move in September.

One fear is that an aggressive rate hike by the Fed could send the economy into recession. Read more

Among the day’s losers, Netflix Inc (NFLX.O) slipped 5.1% after Goldman downgraded the streaming video giant’s stock to ‘sell’ from ‘neutral’ due to a macro environment maybe weaker.

Falling issues outnumbered rising ones on the NYSE by a ratio of 5.70 to 1; on the Nasdaq, a ratio of 4.05 to 1 favored the decliners.

The S&P 500 posted a new 52-week high and 44 new lows; the Nasdaq Composite recorded 17 new highs and 326 new lows.

Volume on U.S. exchanges was 12.62 billion shares, compared to an average of 11.88 billion for the full session over the past 20 trading days.

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Additional reporting by Devik Jain, Mehnaz Yasmin and Shreyashi Sanyal in Bengaluru and Davide Barbuscia in New York; Editing by Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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