The most recent wave of sales has hit cryptocurrencies as well Bitcoinand metals and more commodities such as copper and oil, losses reflecting weakening sentiment in financial markets as well as concerns about the global economy. All of those were lower in early Thursday trading.
The drop has left the S&P 500 on the verge of a bear market, Wall Street’s deadline for a drop of 20% or more since its last peak, a label set to highlight just how gloomy mood has become among investors. As of Wednesday, the index was down 18% from its January 3 peak. The Nasdaq Composite is in bear market territory, down 29% from its November high.
This week’s drop came along with new updates on the pace of inflation in the US. The consumer price index rose 8.3% in the year to April from the previous year, the government said Wednesday, while a measure of the prices paid to producers rose 11%. While both measures showed that inflation has cooled slightly from the previous month, they are still at an unpleasant level.
For equity investors, inflation data directly feeds views on how aggressively the Federal Reserve will raise interest rates – higher finance costs will slow growth and also reduce interest in risky investments.
Analysts say the gloomy mood among equity investors will not change until they understand when the Fed, which raised its benchmark rate by half a percentage point this month and is expected to do so again when it meets in June and July will slow the rate hike. This will not be clear until it is certain that inflation has peaked.