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Inflation (Economics)

Stock Market Slumps Amid Hot Inflation and Economic Uncertainty

Strategic Insights

— 2 min read

The stock market sold off significantly this week, led by a hot consumer price index (CPI) report that signaled the Federal Reserve's rate hikes will continue for longer than previously thought. The major indexes dived below their 50-day moving averages, while Adobe plunged on mixed results and a $20 billion acquisition. Oracle skidded on flat profit, and energy prices were volatile. The CPI report showed a slight ease in headline inflation to 8.3% from 8.5% in July, but outside falling gas prices, the news was all bad, with food prices jumping 0.8% on the month and 11.3% from a year ago.

Key Takeaways:

  • The stock market plummeted this week, with the Dow Jones, S&P 500, and Nasdaq indexes falling below their 50-day moving averages.
  • The hot CPI report signaled continued Fed rate hikes, with inflation expected to remain high for longer than previously thought.
  • Adobe stock fell nearly 17% after announcing plans to buy startup Figma for $20 billion in cash and stock, the largest-ever acquisition for the digital media and marketing software firm.
  • Oracle's flat profit led to a fall in shares, despite a 18% revenue jump to $11.4 billion, beating views.
  • The Philadelphia Fed's regional manufacturing survey index unexpectedly fell into negative territory, amid a contraction in new orders, despite retail sales rising a better-than-expected 0.3% in August.
  • FedEx reported a 21% drop in earnings compared to a year earlier, crushing views for an 18% gain, while revenue rose modestly but slightly missed forecasts.
  • Steel stocks fell 9-11% after Nucor warned on Q3 earnings amid lower-than-expected shipments and softer pricing.
  • Oracle's cloud revenue growth accelerated as it bets on a health care overhaul, while Google faced rising fines and antitrust woes, including a $500 million fine in South Korea.

Statistics:

  • The CPI report showed a slight ease in headline inflation to 8.3% from 8.5% in July.
  • Food prices jumped 0.8% on the month and 11.3% from a year ago.
  • Core inflation, excluding food and energy, accelerated to 6.3% from 5.9%, with a 0.6% monthly increase.
  • Prices of non-energy services, like rent, medical care, and transportation, rose 0.6% from July and 6.1% from a year ago.
  • Producer prices slipped 0.1%, bringing the annual increase down to 8.7%, the lowest in a year.
  • New claims for jobless benefits fell 5,000 to 213,000, the lowest since May.
  • Continuing claims edged up 2,000 to 1.403 million.
  • Retail sales rose a better-than-expected 0.3% in August.
  • The Philadelphia Fed's regional manufacturing survey index unexpectedly fell into negative territory.

Sources:

  • Bloomberg
  • Reuters
  • CNBC
  • Financial Times
  • Wall Street Journal

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