Stocks finished lower Wednesday, while the dollar extended gains against its global peers, as markets continue to gauge the impact of soaring inflation on global growth prospects and question central banks' ability to tame it.
The Dow Jones Industrial Average finished down 176 points, or 0.54%, to 32,812, while the S&P 500 lost 0.75%. The tech-focused Nasdaq was slipped 0.72%.
"The mood on Wall Street is turning very negative as the economy is headed for a rough patch. Comments from JPMorgan CEO Dimon that the economy is headed for a 'hurricane' are also weighing on sentiment," said Edward Moya, senior market analyst for the Americas with Oanda.
President Joe Biden met with Federal Reserve Chairman Jerome Powell in the White House yesterday, in fact, to plot a course for the world's largest economy out of its inflation trap, which is hammering consumer confidence and squeezing discretionary budgets.
Biden vowed to "respect the Fed’s independence" but the messaging of the meeting -- including photographs from the Oval Office -- left observers in little doubt as to the importance of inflation on both the President's economic agenda and the Democrats mid-term election prospects in November.
In the meantime, data from Europe showed another slowdown in manufacturing activity last month -- amid the highest inflation rate on record -- as surging input costs, supply chain disruptions and softening demand took their tool on the region's most important economic driver.
European stocks were marked modestly lower as a result, with the Stoxx 600 down 0.1% in late-day Frankfurt trading following a 0.5% slide for the region-wide MSCI ex-Japan index in overnight trading.
Here in the U.S., investors tracked the Bank of Canada's latest interest rate decision, which lifted base rates by 50 basis points to 1.5%, as the central bank looks to slow inflation, and a red-hot housing market, ahead of planned rate hikes from the Federal Reserve later this month.
ISM manufacturing data for the month of May was also released at 10:00 am Eastern time, with data showing a solid, but by no means spectacular, final tally of 56.1 points.
The ISM's employment index, however, fell to 49.6 points -- below the 50 point mark that separates growth from contraction -- as hiring continues to be a challenge in a labor market where there were 11.4 million unfilled position in April.
The Fed will also begin to deploy one its more powerful, but lesser-known, inflation-fighting tools Tuesday as it starts the slow reduction of its $9 trillion balance sheet.
The Fed will start selling around $47.5 billion worth of Treasury and mortgage-backed bonds each month, for the next three months, as part of its overall strategy to add upward pressure on market interest rates and slow demand in the world's largest economy.
The pace of those sales will accelerate further, however, to around $95 billion a month by September, putting the Fed on pace to dump around $3 trillion worth of securities on to the market over a span of three years - a rate more than double the last time the Fed began its so-called "quantitative tightening" in 2018.
Benchmark 10-year Treasury note yields were marked 5 basis points higher at 2.917% while the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.82% higher at 102.59.
In terms of individual stocks, Salesforce (CRM) shares rose 9.9% after the enterprise software group posted stronger-than-expected first quarter earnings and boosted its near-term profit forecast.
General Electric (GE) shares edged nearly 1% lower after CEO Larry Culp said the industrial group is seeing robust demand from its customer base, but cautioned that supply-chain bottlenecks remain its most significant challenge.
Pfizer (PFE) fell 1.26% after the pharma group said it will exit its consumer health joint venture with Britain's GlaxoSmithKline GSK.
Delta Air Lines (DAL) shares fell 5.16% after the carrier said June quarter revenues should return to pre-pandemic levels with free cash flow in the region of $1.5 billion, even as it cautioned on higher fuel costs.
