US stocks sold off Friday following May’s consumer price inflation report.
Headline inflation of 8.6% was higher than anticipated and marked a new four-decade high.
Barclays said it now sees the Fed raising rates by 75 basis points next week.
US stocks sank Friday as new inflation data showed more acceleration than anticipated, days before the Federal Reserve is set to raise interest rates again to battle hot consumer prices.
The market’s main equity indexes solidified weekly losses after the Bureau of Labor Statistics said the Consumer Price Index rose 8.6% in the year through May. Economists surveyed by Bloomberg expected a reading of 8.3%.
The Nasdaq Composite dropped by roughly 5.6% for the week, moving further into a bear market. The recent bear market rally in US stocks has fizzled as investors are expecting more inflation and rate shocks, Bank of America said Friday.
Here’s where US indexes stood at 4:00 p.m. on Friday:
“We think the US central bank now has good reason to surprise markets by hiking more aggressively than expected in June,” said Barclays on Friday. “Everything” in the May inflation report was strong turning stronger, from energy to used vehicle and airline prices, it said.
Barclays now expects the Fed to increase the federal funds rate by 75 basis points at its June 14-15 meeting.