Weekly Market Insights: Stocks Dip on Inflation Report

A higher-than-expected inflation report triggered a sell-off on Friday, leaving stocks in the red for the week.

The Dow Jones Industrial Average lost 4.58%, while the Standard & Poor’s 500 dropped 5.05%. The Nasdaq Composite index slid 5.60% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 1.81%.^1,2,3

Inflation Upends Stocks

Stocks gyrated between gains and losses last week until sliding lower on Friday’s hot inflation report, which heightened worries over a more aggressive Fed and a further economic slowdown. Stocks moved higher to begin the week, despite rising bond yields, a profit warning from a major retailer, and Senate testimony by Secretary of Treasury Janet Yellen, who said that inflation was likely to remain elevated.

Stocks turned lower later in the week on renewed concerns of an economic slowdown, sparked by a downward revision in The Federal Reserve-Atlanta’s real-time estimate of second-quarter GDP growth and a drop in new mortgage applications. Investors lightening up on stocks ahead of Friday’s inflation report may have also contributed to Thursday’s selling.

Inside Inflation 

Consumer prices rose 8.6% year-over-year in May, marking the highest rate since December 1981. Price increases over the last 12 months were driven by a 34.6% jump in energy prices and by food costs, which climbed 10.1%. Used car and truck prices, which had seen three straight months of declines, rose 1.8% from April, while airfares soared 12.6% in May.⁴

May’s inflation exceeded economists’ forecasts and dashed the hopes that inflation had plateaued. In a separate economic report on Friday, real wages (net of inflation) fell 0.6% in April and were lower by 3% from 12 months ago.⁵

This Week: Key Economic Data

Tuesday: Producer Price Index.

Wednesday: Retail Sales. FOMC Announcement.

Thursday: Jobless Claims. Housing Starts.

Friday: Industrial Production. Index of Leading Economic Indicators.

^{Source: Econoday, June 10, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Thursday: Adobe, Inc. (ADBE), The Kroger Co. (KR).

^{Source: Zacks, June 10, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

A Checklist of Common Errors When Preparing Your Tax Return

Properly preparing your tax return can be tricky, but here are some tips to help you avoid common errors:

• Submitting your tax return online ensures greater accuracy than mailing it in. The e-file system can detect common errors and send your filing back to you for you to correct, saving you a ton of time in processing and delays.
• Make sure to clearly print or type your full name, taxpayer identification number or SSN, and current address (including zip code).
• Choose only one correct filing status.
• Enter your income on the correct lines and include a Form 1040 to declare additional income and adjustments as needed.
• Put brackets around negative amounts.
• Keep a copy of the signed return and schedules for your records.

* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁶

Footnotes and Sources

^{1. The Wall Street Journal, June 10, 2022}

^{2. The Wall Street Journal, June 10, 2022}

^{3. The Wall Street Journal, June 10, 2022}

^{4. CNBC, June 10, 2022}

^{5. CNBC, June 10, 2022}

^{6. IRS.gov, January 3, 2021}

^{7. Mindful.org, July 8, 2020}