Speculation that inflation might have peaked earlier this year died abruptly with this morning’s release of the Labor Department’s latest consumer price index (CPI). And what the data showed was that prices were still rising last month.
Specifically, the CPI surged 8.6% year-over-year in May, the fastest pace since December 1981. The sharp rise in consumer inflation was broad-based, but annual increases were particularly stunning in both gas prices (+50.3%) and groceries (+11.9%). On a month-over-month basis, the consumer price index was up 1%, compared to April’s 0.3% rise in prices. Both figures were higher than what economists were expecting.
Also released this morning was the University of Michigan’s preliminary consumer sentiment index for June, which arrived at 50.2 – down 14.2% from May, the lowest value this decades-old indicator has reported. According to the report, 46% of survey respondents pointed to inflation for their negative outlook toward the economy, up 38% from last month.
“The crash in sentiment means that consumers are more and more worried about future economic conditions,” says Jeffrey Roach, chief economist for independent broker-dealer LPL Financial. “We need to listen to what consumers say but more importantly, we need to watch what consumers do. We do expect a slowdown in consumer spending as inflation and uncertainties weigh heavily on sentiment.”
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The reports were met with sharp selling on Wall Street. All 11 sectors finished in the red, with consumer discretionary (-4.0%) and technology (-3.8%) suffering the biggest drops.
As for the major indexes, the Nasdaq Composite slid 3.5% to 11,340, the S&P 500 Index shed 2.9% to 3,900 and the Dow Jones Industrial Average skidded 2.7% to end at 31,392.
Other news in the stock market today:
- The small-cap Russell 2000 slumped 2.7% to 1,800.
- U.S. crude futures shed 0.7% to settle at $120.67 per barrel.
- Gold futures jumped 1.2% to end at $1,875.50 an ounce.
- Bitcoin sank 3.4% to $28,966.18. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- Netflix (NFLX, -5.1%) and Roblox (RBLX, -9.0%) posted sharp losses today after Goldman Sachs downgraded the stocks to Sell. “We downgrade NFLX to Sell as we have concerns around the impact of a consumer recession as well as heightened levels of competition on demand trends (both in the form of gross adds and churn), margin expansion and levels of content spend and view NFLX as a show-me story with a light catalyst path in the next 6-12 months,” the analysts write in a note. And while they still view RBLX as …….