Stocks tumbled on Wednesday after inflation accelerated in June more than expected, putting pressure on the Federal Reserve to remain aggressive in its fight against price increases.
The S&P 500 slumped after data showed the consumer price index rose 9.1 per cent from a year earlier, the largest gain since 1981. The print reaffirmed that inflation has been rampant and widespread throughout the economy. For investors, it reinforced views that the central bank will have to continue to be aggressive in its attempts to tamp it down. The tech-heavy Nasdaq 100 fell more than 2 per cent as the market opened New York.
At 6.44pm UAE time, the S&P 500 was down 0.33 per cent, while the Dow was lower by 0.66 per cent. The Nasdaq was slightly in the green at 0.16 per cent.
Bank of America Corp. economists forecast a "mild recession this year" in the US, saying services spending is slowing and hot inflation is spurring consumers to pull back.
"A number of forces have coincided to slow economic momentum more rapidly than we previously expected," analysts led by Michael Gapen, who recently joined the firm as head of US economics, said in a report Wednesday. These include inflation from food and energy prices that leave households with less available for discretionary purchases, and tighter financial conditions, with higher mortgage rates denting affordability.
BofA joins Wells Fargo Investment Institute and Nomura Holdings Inc. in expecting a recession in 2022. Economists at Deutsche Bank AG, one of the first major banks to forecast such a contraction, see one starting in mid-2023.