CPI news sends stocks tumbling: inflation rate hits 40-year high

The Dow Jones Industrial Average is down more than 800 points on Friday after investors reacted negatively to the latest inflation data in the US.

The consumer price index  (CPI) data for May showed prices jumped 8.6%  year-on-year during the month, the hottest it’s been since 1981. The core CPI, which excludes food and energy rose 6% YoY in May.

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As the market digested the 40-year high inflation reading, downside pressure engulfed the stock market.

The Dow Jones Industrial Average had dropped 806 points (11:40 ET on Friday), shedding more than 2.5%. The pressure also saw the blue chip index S&P 500 decline by more than 2.9%, while the Nasdaq Composite plunged nearly 3.6%.

Analysts see even hotter inflation readings coming next

The meltdown in stocks comes as investor sentiment tanks and concerns over recession go a notch higher. Amid all these, market analysts are convinced the Fed is unlikely to bring inflation under control anytime soon, with the stock market invariably in the throes of further weakness.

Economist Mohamed El-Erian thinks indications in the first half of June already point to a higher inflation during the next release.

“I want the Fed to go 100 basis points. Just get it over with,” CNBC’s Mad Money host Jim Cramer said in a comment on Friday.” I think now we all just have to feel that there’s going to be a recession of sorts,” he added.

Elsewhere in the bond market, the 2-year US Treasury yields surged following the inflation data and as the Fed moves in with another rate hike. The yield rose by 18 basis points to 3%, the highest level since 2008. Meanwhile, the benchmark 10-year Treasury yield jumped more than 11 basis points to 3.15%.

Gold was up 0.7% to $1,865.70 per ounce, while in cryptocurrencies, Bitcoin had shed 2.8% in the past 24 hours to trade around $29,420.