U.S. stocks tumbled on Thursday as worries mounted on Wall Street over Friday’s key inflation data.
The S&P 500 lost 2.4% and the Dow Jones Industrial Average lost 640 points, or 1.9%. The Nasdaq Composite fell 2.8%. A larger percentage of losses occurred in the last hour of trading as selling accelerated at the end of a weak session.
Investors are preparing for the latest consumer price index (CPI) from the U.S. Bureau of Labor Statistics on Friday as they look for more clues on how aggressively the Federal Reserve will raise interest rates. The reading for May is expected to show inflation persisting in May. Consensus economists expect headline inflation to pick up at an annual rate of 8.3% in May — the same level as in April — and 5.9% excluding food and energy prices.
The slowdown was also accompanied by disappointing pre-open jobs data and confirmation of the European Central Bank’s intention to raise interest rates next month.
Weekly jobless claims totaled 229,000 last week, the highest since January, in a sign of increased underlying pressure on the labor market. Ahead of the data, all three major indexes were pointing to opening gains of more than 0.4%.
Oil prices edged lower but remained above $120 a barrel, and the U.S. 10-year yield rose to 3.06%, above the 3% hit earlier this week for the first time since the 10-year yield started breaking out in May mark.
Investors continued to search for clues about how the economy is doing amid tight financial conditions and how aggressive the Fed’s rate-hike cycle could become before it could be paused.
The latest weekly jobless claims report follows Friday’s strong jobs data, which could signal to policymakers that current labor market conditions can withstand further monetary tightening. Central bankers have let the labor market guide the pace of interest rate hikes to fight inflation, with policies aimed at curbing labor demand so as not to push unemployment too high.
“The increase in initial jobless claims is consistent with anecdotal evidence from CEOs that they closely monitor employee numbers, which often masks their behavior when they quietly issue pink sheets,” FWDBONDS Chief Economist Christopher S. Rupkey said in a morning report. “One thing’s for sure, the unemployment rate has nothing to do but be driven by inflationary costs for every business across the country, and cost containment measures have to be put in place, which could fall on the shoulders of workers.”
Elsewhere, shares of Tesla stocks (TSLA) ended slightly lower after rising as much as 3% during the session after UBS raised it to buy. The report also states that the electric vehicle giant is “most likely to become one of the top three global automakers by 2030.”
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