US equities sank of Fri, after the release of worse than expected US inflation data. The Dow Jones Industrial Average lost 880 pts or 2.73% to close at 31392.79. The S&P 500 index fell 2.91%. The tech-heavy Nasdaq Composite retreated 3.52%. The small cap Russell 2000 lost 2.73%.
Megacap tech stocks fell on Fri, including Apple (AAPL US, -2.94%), Microsoft (MSFT US, -3.54%) Amazon (AMZN US, -4.69%), Alphabet (GOOGL US, - 2.27%), Nvidia (NVDA US, -5.04%), and Meta Platforms (META US, -3.66%).
Early trade in US equity index futures are pointing to a lower opening when Wall Street opens for regular trade later today. Futures tied to the Dow Jones Industrial Average have dropped about 360 points.
On Fri, the US Bureau of Labor Statistics reported that its consumer price index (CPI) increased 8.6% from a year ago more than estimates of 8.3%. The core CPI, which excludes food and energy prices, was up 6%, slightly higher than the 5.9% estimate.
The yield of the two-year US Treasury note skyrocket. The yield on the 2-year rose 25.19 basis points to 3.0632%. The 2-year is very sensitive to the Federal Reserve’s plans for short-term interest rates. Fixed income traders believe the Fed is going to have to speed up their plans for rate hikes.
The yield on the 10-year Treasury note notched up 11.37 basis points (bps) to 3.1555%. The spread between the 2-year and 10-year is again very narrow.
Junk bonds took a hit. The iShares iBoxx High Yield Corporate Bond ETF (HYG US) fell 1.70%. The average yield-to-maturity in the HYG ETF is now 7.23%.
The front-month Brent and WTI futures closed down $1.06 at US$122.01/bbl and $0.84 at US$120.67/bbl respectively.
The ICE dollar index (DXY), which measures the strength of the greenback against a basket of currencies, rose 0.90% to 104.148.
Despite the strong US dollar, precious metal prices rose. The most actively traded US gold futures (Jun) contracts settled up $22.70, or 1.23%, at US$1,875.50/oz. July silver, which is the most actively traded silver futures, rose 11.6 cents, or 0.53%, to end at US$21.913/oz. Investors may believe that it will take a while for the Fed to get inflation under control.
European equity markets finished lower on Fri. The UK FTSE lost 2.12%, France's CAC 40 fell 2.69%, while the German DAX retreated 3.08%.
Credit Suisse (CSGN SW) closed down 5.7% after State Street (STT US, -4.3%) dismissed rumours that it is considering a takeover of the embattled Swiss lender.