US Market Weekly: US Markets Plunged Post Higher Than Expected Inflation

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The last two days' sharp fall meant Wall Street suffered its worst week in months. The Dow fell 4.58% for its 10th down week in the past 11. The S&P 500 and Nasdaq Composite lost 5.05% and 5.60%, respectively, for their ninth losing week in 10 and the worst week since January.

The US stock market ended slightly higher on Monday after a morning rally lost ground earlier in the session. The swing lower in equities from session highs came as the 10-year US Treasury benchmark topped 3%.

The US market continued to rise for the second straight session on Tuesday even after Target issued a warning about its current quarter’s profits, which put pressure on the broader retail sector. The indexes opened solidly lower but trimmed those losses and turned positive as the day progressed.

The US equity market fell on Wednesday as investors monitored signs of a potential economic slowdown and kept eye on the bond market. The price of oil rose, with US benchmark West Texas Intermediate crude pushing well above $120 per barrel.

All major indices fell sharply on Thursday ahead of a key inflation report as investors worried about the state of the US economy. The major tech stocks struggled with Apple, Amazon, and Meta sliding between 3% to 7%.

The US stocks fell sharply on Friday after a highly anticipated inflation report showed a faster-than-expected rise in prices and consumer sentiment hit a record low. The sell-off was broad, with nearly every member of the 30-stock Dow in the red.

Key highlights of the week:

May CPI Report: The May consumer price index report came in at its highest level since 1981. The report showed prices rising 8.6% year over year, and 6% when excluding food and energy prices. Economists surveyed by Dow Jones expected year-over-year increases of 8.3% for the main index and 5.9% for the core index. The one silver lining in this month's CPI report is that we saw a modest decline in core inflation, from 6.2% to 6.0% year-over-year

US Bond Yield:  Treasury yields spiked higher after an unexpectedly hot reading in consumer prices. The 10-year US Treasury note yield consolidated above 3%, moving closer to an over three-year peak of 3.2%. The 2-year rate jumped more than 24 basis points to 3.065%, reaching its highest level since 2008. 

Consumer sentiment plunges: The University of Michigan's gauge of consumer sentiment fell sharply to a record low reading of 50.2, down from a May reading of 58.4. Economists polled by the Wall Street Journal had expected a June reading of 59. The level is comparable to the low point reached in the middle of the 1980 recession.

Retailers under pressure: In the latest sign of major retailers struggling with mismatches of supply and demand, Target guided profit estimates lower on Tuesday for the second time in three weeks. The retailer warned profits would drop due to cancellation of orders or offering discounts to clear out unwanted goods. However, Target announced on Friday that it will increase its annual dividend by 20%.