U.S. Stocks Move Sharply Lower Ahead Of Inflation Data

After initially showing a lack of direction, stocks moved sharply lower over the course of the trading session on Thursday. With the steep drop on the day, the major averages extended the downward move seen in the previous session.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow tumbled 638.11 points or 1.9 percent to 32,272.79, the Nasdaq plunged 332.05 points or 2.8 percent to 11,754.23 and the S&P 500 dove 97.95 points or 2.4 percent to 4,017.82.

The sell-off on Wall Street came as traders looked ahead to the release of a Labor Department report on consumer price inflation on Friday.

The report is expected to show that consumer prices increased by 0.7 percent in May after rising by 0.3 percent in April. Core consumer prices, which exclude food and energy prices, are expected to climb by 0.5 percent in May following a 0.6 percent advance in April.

The annual rate of consumer price growth is expected to hold at 8.3 percent, while the annual rate of core consumer price growth is expected to slow to 5.9 percent from 6.2 percent.

The inflation data could have an impact on the outlook for monetary policy ahead of the Federal Reserve’s decision on interest rates next Wednesday.

On the economic front, a report released by the Labor Department showed first-time claims for U.S. unemployment benefits rose by more than expected in the week ended June 4th.

The Labor Department said initial jobless claims climbed to 229,000, an increase of 27,000 from the previous week’s revised level of 202,000.

Economists had expected jobless claims to rise to 210,000 from the 200,000 originally reported for the previous week.

Sector News

Steel stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Steel Index down by 4.5 percent.

Significant weakness was also visible among airline stocks, as reflected by the 3.8 percent nosedive by the NYSE Arca Airline Index.

Gold stocks also considerable weakness amid a modest decrease by the price of the precious metal, with the NYSE Arca Gold Bugs Index tumbling by 3.7 percent.

Oil service, biotechnology and banking stocks also showed notable moves to the downside amid broad based selling pressure on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. China’s Shanghai Composite Index and Hong Kong’s Hang Seng Index fell by 0.8 percent and 0.7 percent, respectively, although Japan’s Nikkei 225 Index closed slightly higher.

The major European markets also moved to the downside on the day. While the German DAX Index tumbled by 1.7 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index slumped by 1.5 percent and 1.4 percent, respectively.

In the bond market, treasuries showed a lack of direction before closing modestly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.5 basis points to 3.044 percent.

Looking Ahead

Trading on Friday is likely to be driven by reaction to the report on consumer price inflation, while a preliminary reading on consumer sentiment in June may also attract some attention.

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