Morning Minutes

High Inflation Sends Stocks Into Free Fall




Investors had already been on tenterhooks about stagflation and yesterday after the European Central Bank announced a new interest rate hike program, raised inflation guidance and cut GDP guidance, and this morning, hot inflation numbers out of the US and Canada appear to have pushed sentiment over the edge.

US consumer prices increased more than expected in May to their highest year over year growth since 1981 (8.6% vs street 8.3%). Meanwhile Canadian wage growth accelerated in May (4.5% vs previous 3.4%) along with employment growth (40K vs street 30K and previous 15K).

Adding to yesterday’s US major index declines of 2.0% to 2.75%, US index futures are down another 1.0% to 1.5% this morning. The 10-year US treasury note yield is holding steady near 3.00% but the 2-year and 3-year yields have pushed up toward that key psychological barrier as well this morning. The US Dollar is soaring again, gaining 0.3% against the Loonie, 0.5% against the Euro and Pound, and about 1.25% against both Gold and Bitcoin.  All of this market action suggests that the Fed remains under significant pressure to do something about inflation at next week’s meeting. The Fed decision, statement and member projections are due on Wednesday the 15th at 2:00 pm EDT.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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