Wall Street Dives On Inflation Fears

Array
(
    [0] => Array
        (
        )

    [1] => Array
        (
        )

)

By Greg Peel

The biggest one day fall on Wall Street since March 2003 was triggered overnight by core inflation fears. While earlier in the week wage data was heartening for the market, a CPI increase for April of 0.6% was greater that expected. A 3.9% rise in energy prices exacerbated the figures but the core inflation measure, which precludes volatile food and energy prices, rose 0.3%. This was the trigger.

The Dow Jones dived and the Nasdaq finally wiped out all its gains for the year. The US futures markets moved closer to a belief that the Fed will continue to tighten rates another 0.25%, and perhaps beyond. On the previous day futures indicated a 36% bet but now that number is 54%.

This was no thin market freefall. Two billion shares traded hands across the NYSE and Nasdaq exchanges.

While oil prices and gold were slightly weaker, metals markets made no substantial moves overnight. This provides no guide as to whether the Australian market’s resource sector will be hit hard based on general market selling from Wall Street’s impetus.

Click to view our Glossary of Financial Terms