According to U.S. Labor Department data, consumer prices increased 7.5% last month year over year. This was higher than economists' estimates at 7.3%. It also marks the largest annual inflation increase in 40 years.
U.S. stocks dropped further after James Bullard, President of the St. Louis Federal Reserve Bank, stated that the data had made him "dramatically more hawkish". Bullard, who was a voting member on the Fed's rate-setting commission this year, stated that he now wants a full percentage point increase in interest rates by July 1.
"Inflation tends be a kryptonite for valuations. "Inflation increases multiples, and that's exactly what we are experiencing right now," stated Terry Sandven, chief equity strategist, U.S. Bank Wealth Management, Minneapolis.
"Volatility will likely remain until the magnitude and number of Fed rate increases is better understood."
Bullard's comments were quickly followed by rate futures contracts fully pricing an increase of the Fed’s target range for the Fed’s policy rate to 1%-1.255% by June's policy meeting. Some bets also placed on a steeper rate hike path.
Megacap growth stocks Tesla, Nvidia (NASDAQ : TSLA) Inc., Nvidia [NASDAQ: NVDA] and Microsoft (NASDAQ : MicrosoftFT) each lost about 3%.
The Dow Jones Industrial Average dropped 1.47% to 35,241.59 point, while the S&P500 fell 1.81% to 4,054.06.
The Nasdaq composite fell 2.1% to 14,185.64 This was the seventh session in which the Nasdaq experienced a loss of more than 2%.
The S&P 500 is currently down about 5% by 2022 and the Nasdaq down about 9%.
The 11 S&P 500 sector indicators declined. Technology ( SPLRCT) was down 2.75% and real estate, down 2.86, were the leaders.
U.S. companies reported positive quarterly results. According to Refinitiv data, 78% of S&P 500 companies have reported results that beat analysts' profit estimates.
Walt Disney (NYSE : DIS) Co grew 3.4% following beating revenue and profit estimates due to strong subscriber additions, and attendance at U.S.-based theme parks.
After predicting full-year profits that exceeded market expectations, Barbie maker Mattel Inc (NASDAQ MAT ) & cereal maker Kellogg [NYSE: K] Co gained 7.65% & 3.11%, respectively.
The session on Thursday was very busy. The volume on U.S. stock exchanges was 12.8 Billion shares, compared to a 12.5 Billion average over the past 20 trading days.
On the NYSE, declining issues outnumbered advancing by a ratio of 3.08 to 1. While on Nasdaq, a ratio of 2.26 to 1 favors decliners.
31 new 52-week highs were set by the S&P 500, while 4 new lows were set by the Nasdaq Composite. The Nasdaq Composite posted 55 new highs as well as 102 new lows.