US stocks were on track for their biggest weekly decline in two months on Friday, following the latest evidence of soaring inflation in the world’s biggest economy traders.
The S&P 500 fell 1 percent in morning trade while the Nasdaq 100 fell 1.9 percent, with both indexes extending their losses from earlier this week. The former is down 3 percent this week, and the latter is down 3.5 percent.
US Treasuries also sold, with the interest-sensitive two-year yield up 0.1 percentage point to 4.82 percent, the highest since June 2007. The 10-year Treasury yield rose 0.08 percentage point to 3.96 percent.
Core monthly personal consumption expenditures – a measure of prices closely watched by the Federal Reserve – rose 0.6 percent from December to January, compared with forecasts of 0.3 percent. The annual figure was 4.7 percent, higher than the 4.3 percent anticipated.
The figures follow fresh labor market and consumer price data that have fueled market expectations the Fed will need to work again to lift borrowing costs to win the fight against inflation. The numbers there “all but ensure that the Fed will continue in the campaign of hiking rates for much longer than the market anticipated just a few weeks ago”, said Jeffrey Roach, chief economist for LPL Financial.
The market is now pricing in a rise in the benchmark funds rate to between 5.25 percent and 5.5 percent in July – more than half a percentage point higher than what investors expected to rise in early February.
Stocks also dragged down in Europe. The region-wide Stoxx 600 fell 1 percent, while London’s FTSE 100 fell 0.4 percent.
Germany’s Dax fell 1.7 percent and France’s CAC 40 fell 1.8 percent.
Investors are also worried that the European Central Bank will raise rates further. Joachim Nagel, president of the Bundesbank and a member of the ECB’s governing council, said on Friday that inflation is likely to “remain at a very high level”, which would require “a significant increase in interest rates beyond March”.
Earlier in Asia, the Hang Seng index fell 1.7 percent, while China’s CSI 300 lost 1 percent. Even though e-commerce group Alibaba beat analysts’ expectations with fourth-quarter earnings, its shares fell 5.4 percent, reflecting investor jitters about China’s economy even as the government eases Covid-19 restrictions.
The euro fell 0.5 percent while the dollar index, which measures the greenback against a basket of six peer currencies, rose 0.5 percent.