Friday June 10th

U.S. stock index futures dropped on Friday morning after a highly anticipated inflation report showed a faster-than-expected rise in prices. Futures tied to the Dow Jones Industrial Average shed 464 points, or 1.5%. Those for the S&P 500 fell 1.4%, while Nasdaq 100 futures sank 1.7%. The May consumer price index report came in hotter than expected, putting pressure on the stock market. The report showed prices rising 8.6% year over year, and 6% when excluding food and energy prices. Economists surveyed by Dow Jones were expecting year over year increases of 8.3% for the main index and 5.9% for the core index. “It’s confirming some of the fears I’ve been hearing from investors this week,” said Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets. She said alarm over inflation has been driving stocks lower this week. “Does it sort of force equities to stay at stay at the bottom the range it’s been in? Perhaps. I don’t think this is enough to force it down to new lows,” Calvasina added. The hot inflation reading could lead traders to price in more rate hikes from the Federal Reserve later this year. The 2-year Treasury yield, which is seen as one of the most sensitive to Fed rate hikes, jumped above 2.8% on Friday. Tech stocks were under pressure as investors grappled with higher rates and a potential recession. Shares of Netflix dropped more than 5% following a downgrade from Goldman Sachs. Chip giant Nvidia slid 3.3%. Banks and cyclical stocks also moved lower, possibly reflecting recession fears. Shares of Wells Fargo shed more than 2%. Boeing dropped 2.5%. For the week so far, the Dow is lower by 1.9%, on track for its 10th down week in the past 11. The S&P 500 and Nasdaq Composite are both off by more than 2%, on pace for their ninth losing week in 10. The move in futures comes after stocks fell sharply during Thursday’s regular session, with the S&P 500 and Nasdaq Composite each falling more than 2%. The Dow closed down more than 600 points, losing roughly 400 points during a rocky final hour of trading on Wall Street. “I think there’s still a pretty high degree of pessimism that helps underpin the market, and the back-and-forth action is really the market trying to make sense of the next direction and waiting for news flow,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. Later on Friday, a preliminary consumer sentiment reading for June is due out after the stock market opens. Shares in Asia-Pacific were mixed on Friday as Chinese inflation data for May came in largely in line with expectations. Investors also looked ahead to the release of U.S. inflation data later stateside. Hong Kong’s Hang Seng index slipped 0.29% to close at 21,806.18. In mainland China, the Shanghai Composite gained 1.42% to close at 3,284.83 while the Shenzhen component jumped 1.901% to 12,035.15. Japan’s Nikkei 225 shed 1.49% to close at 27,824.29 as shares of SoftBank Group dropped 2.01%, while the Topix index declined 1.32% to 1,943.09. South Korea’s Kospi fell 1.13% to end the trading day at 2,595.87. Oil prices rose slightly to trade near three-month highs, but were kept in check amid concern over new Covid-19 lockdown measures in Shanghai outweighing solid demand for fuels in the world’s top consumer United States. Brent crude futures for August were up 0.5% at $123.63 a barrel after a 0.4% decline the previous day. U.S. West Texas Intermediate crude for July climbed 42 cents, or 0.4%, to $121.94 a barrel, having dropped 0.5% on Thursday. Brent was on track for a fourth consecutive weekly gain and WTI was set for a seventh straight weekly increase. Both benchmarks on Wednesday marked their highest closes since March 8, when they hit their highest settlements since 2008. Gold edged down on Friday and was set for a weekly fall, with investors awaiting key monthly U.S. inflation data for cues on the future of the Federal Reserve’s monetary policy. Spot gold eased 0.2% to $1,843.59 per ounce, while U.S. gold futures pulled back by 0.4% to $1,845.90.