Breakfast losses were broad-based, with all 11 areas of the S&P 500 in the red. The Labor Department said Friday that the consumer price index rose 8.6 percent in May from the same month last year, more than the 8.3 percent expected by economists surveyed by the Wall Street Journal. Rising fuel prices and supply chain disruptions from Russia’s war against Ukraine, as well as lockdowns related to China’s zero-Covid strategy, have contributed to higher prices. Higher inflation introduced renewed volatility in the stock, bond and currency markets as investors sought to estimate how aggressive the Federal Reserve might need to be to push up price pressures. Fed officials are expected to largely raise the key central bank rate by half a percentage point next week and resume it in July. Money managers watched Friday’s inflation data for indications of the Fed’s decision on interest rates in the fall and where to distribute their investments. A rapid rise in interest rates could affect technology stocks, which tend to do well in lower interest rate environments. Treasury Secretary Janet Glenn warned this week that the United States is likely to face a prolonged period of high inflation. Some investors worry that the economic tightening to curb inflation could also affect growth, boosting concerns about a recession. The World Bank has sharply cut global growth forecasts and warned of the risk of recession in many countries. “We believe the market will be a little more convinced that top core prices are behind us and will weaken significantly,” said Edward Smith, co-director of investment at Rathbone Investment Management. In bond markets, the yield on the US 10-year benchmark bond rose to 3.091% from 3.041% on Thursday. Meanwhile, the yield on the two-year government bond, which usually reflects investors’ expectations for interest rates, rose to 2.945% from 2.815% on Thursday. Yields and prices are moving in the opposite direction. The WSJ dollar index, which measures the dollar against a basket of 16 currencies, rose 0.47%. Where does inflation affect American household budgets the most? WSJ’s Jon Hilsenrath traces the roots of rising prices to find out why some sectors have grown so much more than others. Photo illustration: Laura Kammermann / WSJ Shares of DocuSign fell 22% after the signature software development company said its growth slowed in the first quarter and it was limiting its recruitment plans. Stitch Fix fell 14% after the personal-styling service announced that it is cutting about 330 jobs as it faces a slowdown in consumer spending and expanding losses. Vail Resorts gained 1.5% after the ski resort operator said third-quarter profits and revenue increased as the impact of the Covid-19 pandemic and related restrictions eased from the same period a year ago. Rent the Runway added 15% after saying it had doubled its revenue from a year earlier in the last quarter. In the energy markets, Brent crude, the international benchmark for oil prices, fell 0.9% to $ 122.01 a barrel. The turmoil in world oil markets caused by the Ukraine war and the subsequent sanctions imposed on Russia are likely to keep oil prices high. Oil prices usually drive the cost of gasoline. Abroad, the continental Stoxx Europe 600 fell 2.4%, leaving the broad index on track for a fourth consecutive day of losses. European stocks came under pressure on Thursday after the European Central Bank announced it would raise its key interest rate from minus 0.5% to zero or higher by September, and possibly further. Russia’s central bank cut its key interest rate to 9.5% from 11% on Friday, the fourth time it has cut interest rates since early April. In Asia, most major indices closed lower. Japan’s Nikkei 225 fell 1.5 percent and South Korea’s Kospi fell 1.1 percent. The Chinese Shanghai Composite declined the trend, adding 1.4%.
The traders worked on the floor of the New York Stock Exchange on Thursday.
Photo: Courtney Crow / Associated Press
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