U.S. stocks had their biggest weekly rate drops since January and ended the day sharply lower. This was because U.S. consumer prices went up more than expected in May, which made people worry that the Federal Reserve would raise interest rates more quickly than expected.
The decline was caused by tech and development stocks, whose prices depend more and more on future earnings.
Because of Microsoft Corp (MSFT.O), Amazon.com Inc (AMZN.O), and Apple Inc (AAPL.O), the S&P 500 lost money.
After the growth report, two-year Treasury yields, which are very sensitive to rate increases, jumped to 3.057 percent, which is the highest level since June 2008.
The benchmark 10-year yield has risen to 3.178 percent, its highest level since May 9.
The report from the U.S. Labor Department showed that the customer price index (CPI) went up by 1% in May after going up by 0.3% in April.
Business experts polled by Reuters thought that the CPI would go up 0.7% each month.
From one year to the next, the CPI increased by 8.6 percent.This was the largest increase since 1981, and it came on the heels of an 8.3 percent increase in May.
This year, stocks have been unstable, and a lot of the selling has been tied to worries about expansion, rising loan costs, and the possibility of a downturn.
“The current report should put to rest any idea that a “stop” in rate hikes will be appropriate by the end of summer, as the Fed is still in a very bad position when it comes to controlling growth,” said Jason Pride, chief venture official for private wealth at Glenmede in Philadelphia.
The Dow Jones Industrial Average (.DJI) was down 880 points, or 2.73 percent, to 31,392.79; the S&P 500 (.SPX) was down 116.96 points, or 2.91 percent, to 3,900.86; and the Nasdaq Composite (.IXIC) was down 414.20 points, or 3.52 percent, to 11,340.02.
For the week, the Dow was down 4.58 percent, the S&P 500 was down 5.06 percent, and the Nasdaq was down 5.60 percent.These were the biggest weekly rate drops since the week ending January 21.
The S&P 500 is down 18.2 percent so far this year.
On Friday, the S&P 500 growth record (.IGX) went down by 3.7%, while the value list (.IVX) went down by 2.2%.
The growth report came out before Wednesday, when the Fed is expected to raise rates for the second time in 50 weeks. Another half-rate point is expected in July, and there is a good chance that the same thing will happen in September.
One worry is that if the Fed raises rates too quickly, it could cause the economy to slow down.
As one of the day’s losers, Netflix Inc. (NFLX.O) fell 5.1% after Goldman downgraded the stock of the real-time video giant from “neutral” to “sell” because of a potentially more unstable climate on a large scale.
On the NYSE, falling stocks outnumbered rising ones by a ratio of 5.70 to 1, and on the Nasdaq, the ratio was 4.05 to 1.
The S&P 500 had one new 52-week high and 44 new 52-week lows, while the Nasdaq Composite had 17 new 52-week highs and 326 new 52-week lows.
The number of offers on U.S. markets was 12.62 billion, which was higher than the average of 11.88 billion for the full meeting over the last 20 trading days.
