Stocks fall sharply as Wall Street gears up for inflation data

U.S. stocks plunged Thursday as angst grew on Wall Street over key inflation data due out Friday.

The S&P 500 tumbled 2.4%, and the Dow Jones Industrial Average shed 640 points, or 1.9%. The Nasdaq Composite slid 2.8.%. The greater share of losses came in the final hour of trading as selling accelerated into the end of a downbeat session.

Investors are bracing for the Bureau of Labor Statistics’ latest Consumer Price Index (CPI) on Friday as they look for further clues on how aggressively the Federal Reserve will ramp up interest rates. May’s reading is projected to show inflation persisted in May. Consensus economists are looking for headline inflation to rise at an 8.3% annual rate for May — on par with April’s print — and by 5.9% excluding food and energy prices.

Downturn also followed data on the labor market that disappointed before the open and confirmation from the European Central Bank of its intention to raise interest rates next month.

Weekly filings for unemployment insurance totaled 229,000 last week, the most since January, and a sign of potential stress building in the labor market. Ahead of this data, all three major indexes were pointing to gains north of 0.4% at the open.

Oil prices were retreated slightly but held above $120 per barrel, and the U.S. 10-year Treasury yield inched higher to 3.06%, north of the 3% level the 10-year breached earlier this week for the first time since early May.

Investors continue to look for clues on how the economy is faring amid tighter financial conditions and how aggressive the Federal Reserve rate hiking cycle may get before a potential pause.

The latest weekly jobless claims report follows strong May employment data last Friday that likely signaled to policymakers current labor market conditions can withstand further monetary tightening. Central bank officials have taken cues from the labor market on the tempo of rate increases as it fights inflation, with policy aimed to cool labor demand just enough not to push the jobless rate too high.

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“The rise of initial unemployment claims does fit with anecdotal evidence provided by CEOs that they are closely watching their head counts which often covers up for their actions where they are quietly giving out pink slips,” FWDBONDS Chief Economist Christopher S. Rupkey said in a morning note. “One thing is for certain, joblessness has nowhere to go but up with inflation boosting costs for every company across the country and cost control measures must be implemented which will likely fall on the backs of labor.”

Elsewhere in markets, shares of Tesla (TSLA) closed slightly lower after the electric vehicle’s stock rose as much as 3% in intraday trading following an upgrade from UBS to Buy. The report also said the electric vehicle giant is “best positioned to become one of the top-3 global car makers by 2030.”

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4:00 p.m. ET: Stocks plunge as investors brace for Friday CPI report

Here’s how the S&P 500, Dow, and Nasdaq capped another downbeat trading session:

• S&P 500 (^GSPC): -18.04 (-0.44%) to 4,097.73

• Dow (^DJI): -104.05 (-0.32%) to 32,806.85

• Nasdaq (^IXIC): -88.96 (-0.73%) to 12,086.27

• Crude (CL=F): -$0.66 (-0.54%) to $121.45 a barrel

• Gold (GC=F): -$4.30 (-0.23%) to $1,852.20 per ounce

• 10-year Treasury (^TNX): +3.7 bps to yield 3.0660%

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9:34 a.m. ET: Equities fall as bond yields push higher

Here’s where the major indexes traded at the start of Thursday’s main session:

• S&P 500 (^GSPC): -18.04 (-0.44%) to 4,097.73

• Dow (^DJI): -104.05 (-0.32%) to 32,806.85

• Nasdaq (^IXIC): -88.96 (-0.73%) to 12,086.27

• Crude (CL=F): -$0.66 (-0.54%) to $121.45 a barrel

• Gold (GC=F): -$4.30 (-0.23%) to $1,852.20 per ounce

• 10-year Treasury (^TNX): +3.7 bps to yield 3.0660%

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8:36 a.m. ET: Jobless claims hit five-month high last week

The latest report on weekly jobless claims suggest some softening in the U.S. labor market.

Initial filings for unemployment insurance rose to 229,000 last week, up 27,000 from the prior week and the highest weekly total since the week of January 14. Economists expected initial claims would total 206,000, according to estimates from Bloomberg.

Continuing claims for unemployment insurance stood at 1.306 million for the week ending May 28, unchanged from the prior week.

Initial claims were a closely-watched source of stress in the labor market in the earliest days of the pandemic, totaling more than 6 million in a single week at the peak in April 2020.

Claims have since moved down to multi-decade lows, but economists have flagged this data series as offering the best real-time window into the state of the U.S. labor market. Against this backdrop, the recent rise in initial claims bears close watching into the summer months.

—Myles Udland, senior markets editor

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7:17 a.m. ET: Stock futures advance as Wall Street attempts to come back from losses

Here were the main moves in futures trading ahead of market open Thursday:

• S&P 500 futures (ES=F): +20.50 (+0.50%) to 4,134.50

• Dow futures (YM=F): +146.00 (+0.44%) to 33,035.00

• Nasdaq futures (NQ=F): +67.25 (+0.53%) to 12,683.00

• Crude (CL=F): +$0.01 (+0.01%) to $122.12

• Gold (GC=F): -$6.50 (-0.35%) to $1,850.00 per ounce

• 10-year Treasury (^TNX): +5 bps to yield 3.0290%

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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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