Stocks whipsawed after an unexpectedly hot US inflation report shook global financial markets, raising chances that the Federal Reserve will tighten its belt even further.
The S&P 500 failed to close in the green after a strong recovery from a 1.6% decline in a session of tense swings. Hawkish signals from Fed's Bostic, who stated "everything is in play" to counteract price pressures, also weighed on confidence.
Two-Yr Treasury yields, which are more susceptible to imminent Fed movements, rose. The euro recovered after briefly dipping below $1, while the loonie fell as the Bank of Canada boosted interest rates by a full percentage point.
Bitcoin rose amid a revival of its inflation-hedge appeal.
The swap markets now indicate that the anticipated outcome of the July Fed policy meeting is a coin toss between a 75-basis-point increase and a 100-basis-point increase. The rationale for this is that the largest increase in the Consumer Price Index since 1981 suggested that an inflation peak may still be out of reach.
Bank of America economists predict a "mild recession" in the United States this year, citing decreasing service expenditure and high inflation, which is causing consumers to cut back. They join Wells Fargo and Nomura in anticipating a decline in 2022. According to Deutsche Bank, one will begin in mid-2023.
