U.S. Stocks May Extend Yesterday’s Sell-Off Following Inflation Data

Following the sell-off seen in the previous session, stocks are likely to see further downside in early trading on Friday. The major index futures are currently pointing to a sharply lower open for the markets, with the S&P 500 futures down by 1.1 percent.

Concerns about the outlook for interest rates are likely to continue to weigh on the markets after the Labor Department released a report showing consumer prices in the U.S. shot up by more than expected in the month of May.

The Labor Department said its consumer price index jumped by 1.0 percent in May after rising by 0.3 percent in April. Economists had expected consumer prices to increase by 0.7 percent.

Excluding food and energy prices, core consumer prices climbed by 0.6 percent in May, matching the growth seen in the previous month. Core prices were expected to rise by 0.5 percent.

The report also showed the annual rate of consumer price growth accelerated to 8.6 percent in May from 8.3 percent in April, showing the biggest surge since December 1981. The annual growth was expected to be unchanged.

Meanwhile, the annual rate of core consumer price growth slowed to 6.0 percent in May from 6.2 percent in April. Economists had expected the pace of growth to decelerate to 5.9 percent.

The bigger than expected increase in consumer prices is likely to convince the Federal Reserve to follow through on its plans to aggressively raise interest rates in an effort to combat inflation.

The Fed is scheduled to announce its latest monetary policy decision next Wednesday, with the central bank widely expected to raise interest rates by another 50 basis points.

Shortly after the start of trading, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of June. The consumer sentiment index is expected to edge down to 58.0 in June from 58.4 in May.

After initially showing a lack of direction, stocks moved sharply lower over the course of the trading session on Thursday. With the steep drop on the day, the major averages extended the downward move seen during Wednesday’s session.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow tumbled 638.11 points or 1.9 percent to 32,272.79, the Nasdaq plunged 332.05 points or 2.8 percent to 11,754.23 and the S&P 500 dove 97.95 points or 2.4 percent to 4,017.82.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan’s Nikkei 225 Index slumped by 1.5 percent, while Hong Kong’s Hang Seng Index fell by 0.3 percent.

The major European markets have also moved to the downside on the day. While the U.K.’s FTSE 100 Index is down by 1.6 percent, the German DAX Index is down by 1.7 percent and the French CAC 40 Index is down by 1.8 percent.

In commodities trading, crude oil futures are climbing $0.79 to $122.30 a barrel after falling $0.60 to $121.51 a barrel on Thursday. Meanwhile, after slipping $3.70 to $1,852.80 an ounce in the previous session, gold futures are sliding $16.60 to $1,836.20 an ounce.

On the currency front, the U.S. dollar is trading at 133.81 yen versus the 134.36 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0550 compared to yesterday’s $1.0617.

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