US stocks ended a positive streak on Wednesday following a surprise inflation figure of 6.2% year to year, higher than the estimate of 5.9% and the biggest annual rise since 1990. The month-to-month figure was also higher than expected at 0.9% versus 0.6%.
Digging deeper into the reasons and according to analysts, the relatively high figure is the result of continuous supply chain issues and labor shortages. While this is likely to correct itself over time, the inflationary environment could mean rate hikes sooner than expected and faster tapering, according to traders who are following up on this specific topic.
The Dow Jones dropped 240.04 points which equates to about 0.7% and closed at 36,079.94. The S&P fell 0.8% while the Nasdaq composite dropped 1.7% to close at 15,622.71.
It’s worth noting that Technology stocks were hit hart with AMD losing about 6.1% while Nvidia dropped 3.9% and Alphabet 2%.
The dollar gained against most major currencies with the Euro trading in the upper 1.14s while The British Pound trades near the 1.3400 area. The dollar against the Yen bounced sharply higher towards 114s due to a combination of a stronger Dollar and a weaker Yen given slightly risk-on conditions.
On a different note, Cryptocurrencies are seeing volatility again as Bitcoin pushed into new all-time highs and approached the 70,000 area while Ethereum trades around 4,700 and remains on track towards further gains given a healthy uptrend in place, according to cryptocurrency traders.
Experts believe that as indices sit near all-time highs, sell-offs could become faster and deeper given traders’ cautiousness in approaching the markets given prices that have not been seen before. In other words, uncharted territories could create anxiety.
Looking ahead, the rest of the week should be relatively quiet in terms of data while next week will have a few more eventful releases including CPI out of the UK and Canada and retail sales out of the US.
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