Indexes showed no bounce at all in late trading Friday, after the highest inflation since 1981 sent the stock market to losses of more than 2%.
The S&P 500 was down 2.5% and the Dow Jones Industrial Average 2.2%. The Nasdaq composite slid 3.1% as the S&P technology sector suffered one of the worst sector performances, down nearly 3%. Big techs Apple (AAPL), Microsoft (MSFT) and Alphabet (GOOGL) gapped down but remain above their May lows.
Financials also fell more than most other sectors on worries about the economy. Financial Select Sector SPDR (XLF) gapped down nearly 3% and is down more than 6% for the week.
Volume was lower on the Nasdaq and higher in the NYSE vs. the same time on Thursday.
Inflation Spike Hits Stock Market
US Stock Market Today Overview
Last Update: 2:44 PM ET 10/6/2022
The consumer price index rose 8.6% in May from a year ago, an increase from 8.3% in April, and up 1% from the prior month. Core prices, which exclude food and energy components, rose 0.6% from April. The annual core inflation rate eased to 6% from the prior month’s 6.2%.
The Federal Reserve is expected to raise rates by 50 basis points at Wednesday’s meeting. Another half-point hike has been expected in July.
But Friday’s inflation report boosted the chances of additional 50-basis-point hikes in the coming months. CME Group’s FedWatch shows big odds of at least half-point hikes at the June, July and September meetings, and slightly-better-than-even odds of a half-point hike in November.
Also Friday, the University of Michigan’s consumer confidence survey tumbled to 50.2 from 58.4 in May. Economists had expected 58.5.
Jeffrey Roach, chief Economist for LPL Financial, said sentiment is at the lowest since 1978 as consumers grow concerned about future economic conditions. He sees recession risks rising for next year.
“We need to listen to what consumers say but more importantly, we need to watch what consumers do,” Roach said in a note. “We do expect a slowdown in consumer spending as inflation and uncertainties weigh heavily on sentiment.”
More Leading Stocks Break Down
The Innovator IBD 50 ETF (FFTY) tumbled 2.6%. A few IBD 50 stocks hit sell signals.
Linde (LIN) gapped below its 200-day moving average, bringing its decline from the 332.41 buy point to more than 7%. That results in a sell signal a little more than a week since its breakout from a flat base.
New Fortress Energy (NFE) fell below its 50-day moving average and is more than 13% below last week’s breakout entry at 49.40. The stock was removed from IBD Leaderboard today.
Darling Ingredients (DAR) also tumbled below its 50-day line and also has triggered the loss-cutting sell rule.
Genuine Parts (GPC) is now more than 3% below the 141.21 buy point of Thursday’s breakout. Beacon Roofing Supply also slid below its latest buy point. Neither stock has sell signals so far.
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