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Dow dives nearly 900 points as May inflation spike locks in weekly losses for US stocks

Menlo Park, California on May 25.

Justin Sullivan/Getty Images

  • US stocks sold off Friday following May’s consumer price inflation report. 
  • Headline inflation of 8.6% was higher than anticipated and marked a new four-decade high. 
  • Barclays said it now sees the Fed raising rates by 75 basis points next week. 

US stocks sank Friday as new inflation data showed more acceleration than anticipated, days before the Federal Reserve is set to raise interest rates again to battle hot consumer prices. 

The market’s main equity indexes solidified weekly losses after the Bureau of Labor Statistics said the Consumer Price Index rose 8.6% in the year through May. Economists surveyed by Bloomberg expected a reading of 8.3%. 

The Nasdaq Composite dropped by roughly 5.6% for the week, moving further into a bear market. The recent bear market rally in US stocks has fizzled as investors are expecting more inflation and rate shocks, Bank of America said Friday. 

Here’s where US indexes stood at 4:00 p.m. on Friday:  

  • S&P 500: 3,900.86, down 2.9%
  • Dow Jones Industrial Average: 31,392.79, down 2.73% (880.00 points)
  • Nasdaq Composite: 11,340.02, down 3.52%

“We think the US central bank now has good reason to surprise markets by hiking more aggressively than expected in June,” said Barclays on Friday. “Everything” in the May inflation report was strong turning stronger, from energy to used vehicle and airline prices, it said.

Barclays now expects the Fed to increase the federal funds rate by 75 basis points at its June 14-15 meeting.

Around the markets, lumber prices have hit their lowest point in nine months as mortgage demand sinks. Meanwhile, the slide in mortgage applications is leaving the US housing market to see its worst contraction since 2006, said a Freddie Mac economist. 

Billionaire investor Stanley Druckenmiller said we’re six months into a bear market and a recession is coming.

Oil prices turned lower. West Texas Intermediate crude lost 0.9% at $120.43 per barrel. Brent crude, the international benchmark, fell 0.2% to $121.82. 

Gold, considered an inflation hedge, rose 1.3% to $1,876.60 per ounce. The 10-year yield soared 12 basis points to 3.16%. 

Bitcoin dropped 3.4% to $29,124.10.

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