Weekly Market Outlook: Stocks Fall on Inflation Report

A stronger-than-expected inflation report triggered a selloff on Friday, leaving stocks in the red for the week. The Dow Jones Industrial Average lost 4.58%, while the Standard & Poor’s 500 fell 5.05%. The Nasdaq Composite index slipped 5.60% over the week. The MSCI EAFE Index, which tracks overseas developed equity markets, fell 1.81%.1,2,3

Inflation shakes stocks

Stocks oscillated between gains and losses last week until falling in Friday’s inflation report, heightening concerns about a more aggressive Fed and a further economic slowdown. Stocks rose at the start of the week despite rising bond yields, a profit warning from a major retailer and Senate testimony from Treasury Secretary Janet Yellen, who said inflation is likely to remain elevated. .

Stocks fell later in the week on renewed fears of an economic slowdown, triggered by a downgrade to the Federal Reserve-Atlanta’s real-time estimate of second-quarter GDP growth and a decline in new mortgage applications. Investors looking into stocks ahead of Friday’s inflation report may also have contributed to Thursday’s selloff.

Domestic inflation

Consumer prices rose 8.6% year over year in May, marking the highest rate since December 1981. Price increases over the past 12 months were led by a rise in 34.6% by energy prices and by food prices, which rose by 10.1%. Prices for used cars and trucks, which had fallen for three consecutive months, rose 1.8% from April, while air fares jumped 12.6% in May.4

May’s inflation beat economists’ forecasts and dashed hopes of a plateau in inflation. In a separate economic report released on Friday, real wages (net of inflation) fell 0.6% in April and were 3% lower than 12 months ago.5

This week: key economic data

  • Tuesday: Producer price index.
  • Wednesday: Retail sales. FOMC announcement.
  • Thursday: Applications for unemployment benefits. Construction starts.
  • Friday: Industrial production. Index of main economic indicators.

This week: companies reporting profits

  • Thursday: Adobe, Inc. (ADBE), The Kroger Co. (KR).

Footnotes and sources

  1. The Wall Street Journal, June 10, 2022
  2. The Wall Street Journal, June 10, 2022
  3. The Wall Street Journal, June 10, 2022
  4. CNBC, June 10, 2022
  5. CNBC, June 10, 2022

Paul Ellis
Photo by Paul Ellis, CIMA®.

Paul Ellis, CIMA® can be reached at 425.405.7720 or [email protected]


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