US close: Stocks sharply lower following inflation reading

dl nyse new york stock exchange wall st street city finance dow jones nasdaq sp finance dollar dollars us usa united states of america 2 — New York Stock ExchangeSharecast photo / Josh White

Wall Street stocks closed sharply lower on Friday as market participants digested some hotter-than-expected inflation data.

At the close, the Dow Jones Industrial Average was down 2.73% at 31,392.79, while the S&P 500 was 2.91% weaker at 3,900.86 and the Nasdaq Composite saw out the session 3.52% softer at 11,340.02.

The Dow closed 880.0 points lower on Friday, extending losses recorded in the previous session as investors focussed on May's consumer price index report, which revealed the cost of living in the US rose more quickly than expected amid broad-based gains by categories. According to the Department of Labor, in seasonally adjusted terms, the consumer price index rose 1.0% month-on-month, pushing the year-on-year rate of gains to 8.6%, versus 8.3% in April and 8.6% for March.

At the core level, which excludes the oft volatile energy and food components, CPI was up by 0.6% on the month. In year-on-year terms, core CPI was ahead by 6.0% in annual terms, against increases of 6.4% and 6.2% in March and April, respectively. Economists were expecting a year-on-year increase of 8.3% for the main index and 5.9% for the core index.

AvaTrade's Naeem Aslam said: "Inflation engine is running steaming hot and there is still plenty more to come and this is what we can say about looking at the numbers today. Basically, inflation isn’t near its peak levels, and unfortunately, there is a lot more of these soaring numbers to come.

"Traders and investors are concerned as recession odds are only increasing with every day passing. Higher inflation has become an emotional matter now for consumers as it has started to seriously erode their disposable income. Consumers are constantly being pushed into a corner, and higher inflation is making them make difficult choices."

Also on the macro front, a key gauge of consumer confidence hit a more than 40-year low in early June, led by a deteriorating outlook for business conditions one-year ahead, with a preliminary reading of the University of Michigan's consumer confidence index dropping from 58.4 at the end of May to 50.2 - well short of the consensus call for a print of 59.0. The reading was also its lowest recorded value and comparable to the trough reached during the middle of the recession in the 1980s.

Finally, the Federal Government's budget deficit narrowed sharply to $66.0bn in May from $132.0bn at the same time a year ago, a much better reading than the $120.0bn reading expected by economists.

No major corporate earnings were released on Friday.

Reporting by Iain Gilbert at Sharecast.com

Dow Jones - Risers

Walmart Inc. (WMT) $121.70 0.56%
Honeywell International Inc. (HON) $230.94 0.00%
Dowdupont Inc. (DWDP) $30.52 0.00%
Verizon Communications Inc. (VZ) $50.81 -0.24%
Procter & Gamble Co. (PG) $141.95 -0.38%
Walgreens Boots Alliance, Inc. (WBA) $41.54 -0.43%
Coca-Cola Co. (KO) $61.41 -0.63%
Johnson & Johnson (JNJ) $172.54 -0.67%
Amgen Inc. (AMGN) $240.01 -0.72%
Merck & Co. Inc. (MRK) $87.18 -0.93%