Dow Jones Stock markets

S&P 500, Dow and Nasdaq slide as inflation shows no signs of abating. May CPI inflation accelerated 8.6%, faster than forecasts for 8.2%.

The growing expectation is for the Fed to raise its key short-term interest rate by half a percentage point at each of its next three meetings, beginning next week. Wall Street took Friday’s reading to mean the Fed’s foot will remain firmly on the brakes for the economy, dashing hopes that it may ease up later this year. Only once since 2000 has the Fed raised rates by that much, last month. The Fed's moves on interest rates heavily influence that second part. Now “easy mode” for investors is abruptly and forcefully getting switched off. Since early in the pandemic, record-low interest rates engineered by the Fed and other central banks helped keep investment prices high.

An afternoon rally helped the major indexes snap their short skid. But Twitter accepting Elon Musk's bid stole the spotlight.

And while they still view RBLX as the best-positioned name for long-term growth opportunities in the gaming/interactive universe, "we have increasing concerns around the post-pandemic environment and expect a continuation of slowing growth, tough comps, & normalization of margins in the near term." Investors can also drill down on sectors that are typically considered more "inflation-proof" than others – namely, healthcare, consumer staples, utilities and real estate. We do expect a slowdown in consumer spending as inflation and uncertainties weigh heavily on sentiment." Analysts, on average, were expecting earnings of 38 cents per share on $581.8 million in revenue. Also released this morning was the University of Michigan's preliminary consumer sentiment index for June, which arrived at 50.2 – down 14.2% from May, the lowest value this decades-old indicator has reported. In its first quarter, DOCU reported adjusted earnings per share of 38 cents on revenue of $588.7 million. "Whether this translates to more aggressive hikes this summer, or a continuation of 50 basis point [a basis point is one-one hundredth of a percentage point] hikes this fall is the option for the Fed, but the overall reality for the Fed is that inflation is not under control, and they have their work cut out for them in the coming months," Ripley adds. Specifically, the CPI surged 8.6% year-over-year in May, the fastest pace since December 1981. "From a Fed perspective, the chase continues, and more aggressive Fed measures will likely be needed to catch up to runaway inflation," says Charlie Ripley, senior investment strategist for Allianz Investment Management. Both figures were higher than what economists were expecting. "The crash in sentiment means that consumers are more and more worried about future economic conditions," says Jeffrey Roach, chief economist for independent broker-dealer LPL Financial. "We need to listen to what consumers say but more importantly, we need to watch what consumers do. According to the report, 46% of survey respondents pointed to inflation for their negative outlook toward the economy, up 38% from last month.

The S&P 500 shed 2.7% and the Nasdaq dropped about 3%. The May consumer price index rose 8.6% year-over-year, its highest level since 1981. Economists had ...

The S&P 500 is now down about 19% from its record high in January and is once again approaching bear territory. Consumer spending accounts for about 70% of the US economy, and a real decrease in that spending would be a huge blow to gross domestic product. The core index, which excludes food and energy prices, rose by 6%, slightly higher than estimates of 5.9%. The Dow had its 10th down week in 11 and the S&P 500 and Nasdaq its ninth losing week in the past 10. The May consumer price index rose 8.6% year-over-year, its highest level since 1981. "We think the US central bank now has good reason to surprise markets by hiking more aggressively than expected in June," wrote Barclays analysts in a research note on Friday. "We realize it is a close call and that it could play out in either June or July. But we are changing our forecast to call for a 75 [basis point] hike on June 15."

The central bank won't be coming to the market's rescue.

But the central bank hasn’t had to deal with inflation like this in decades. That might seem hard to believe, with a Fed that is known for flinching at the first sign of market pain. And that means there is more pain ahead for the stock market.