US: Stocks drop after latest grim inflation report
WALL Street stocks declined on Wednesday after the latest report showing surging inflation added to recession fears, intensifying debate on next steps by the Federal Reserve to tame prices.
US inflation surged to a fresh peak of 9.1 per cent in June, driven in part by significant increases in petrol prices.
Beyond the hit to consumption from high prices, analysts worry the report will prompt the Fed to adopt even tougher measures to tighten monetary policy, such as a full percentage point interest rate increase at the July 27 meeting.
On Wednesday, Canada’s central bank took that step, raising its lending rate to 2.5 per cent.
The Dow Jones Industrial Average dropped 0.7 per cent to 30.772.79. The broad-based S&P 500 fell 0.5 per cent to 3,801.78, while the tech-rich Nasdaq Composite Index slipped 0.2 per cent to 11,247.58.
Oanda’s Edward Moya said that he still expects the Fed to hike 75 basis points in July, “but a strong case could be made for a full-point increase,” according to a note on Wednesday. “Wall Street isn’t expecting a severe recession, so downward pressure on stocks might be limited to another 5-10 percent,” he added.
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Among individual companies, Delta Air Lines fell 4.6 per cent after reporting lower-than-expected earnings, as spiking fuel prices and higher labour costs offset some of the gains from strong consumer demand for flying.
Twitter jumped 7.9 per cent after investment fund Hindenburg Research revealed it had taken a stake in the firm based on its case against Elon Musk for moving to back out of his US$44-billion buyout bid.
Netflix rose 1.2 per cent after announcing it had partnered with Microsoft on its new ad-supported streaming offering, though the streaming giant said the idea is still in its “very early days.”
Microsoft dipped 0.4 per cent. AFP
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