U.S. stocks ended off Wednesday, while oil prices and the dollar continued to climb, as investors continued to navigate the impact of surging inflation and central bank tightening on global economic growth.
On Wall Street, the Dow Jones Industrial Average fell 0.8% to 32,910.90 at the close. The S&P 500 lost. 1.1% to 4,115.77. The tech-focused Nasdaq lost 0.7%.
The OECD slashed both its U.S. and global growth forecasts on Wednesday, while doubling its inflation estimate, but noted that it doesn't yet see the risk of stagflation that some analysts suggest could characterize the world economy over the second half of the year.
"The world is paying a heavy price for Russia’s war in Ukraine. It is a humanitarian disaster, killing thousands and forcing millions from their homes," the OECD said. "The war has also triggered a cost-of-living crisis, affecting people worldwide. When coupled with China’s zero-COVID policy, the war has set the global economy on a course of slower growth and rising inflation - a situation not seen since the 1970s.
Headline inflationary pressures remain powerful, particularly in the United States, where WTI crude rose to $122.41 per barrel and average gas prices rose to a fresh all-time average high of $4.955 per gallon, according to the most recent AAA assessment.
Target's (TGT) warning on profit margins June 7, as well as its plans to run-down its excess inventory through deeper price discounts, may offer consumers some near-term relief, but overall price gains are likely to remain close to their forty-year peaks until at least the autumn, putting even more pressure on the Federal Reserve to maintain its projected pace of interest rate hikes.
The CME Group's FedWatch tool is pricing in a 98% chance of a 50 basis point rate hike next week, while also placing a 13.7% probability on a 75 basis point move when the Fed meets next in July.
Stocks were mostly weaker in Europe Wednesday, with a profit warning from Credit Suisse (CSGKF) holding down gains for the banking sector and dragging the region-wide Stoxx index to a 0.6% decline in Frankfurt.
Citing both the impact of Russia's war on Ukraine, as well as the rapid pace of central bank tightening amid the surge in global inflation, Credit Suisse said it's likely to book another quarterly loss over the three months ending in June.
"The impact of these conditions, together with continued low levels of capital markets issuance and the widening in credit spreads, have depressed the financial performance of this division in April and May," the bank said.
Overnight in Asia, the region-wide MSCI ex-Japan index gained 1.05% in a follow-on rally from Wall Street's solid close, while a weaker yen, which is trading at the lowest levels against the U.S. dollar in more than twenty years, helped the export-focused Nikkei 225 in Japan close at a two-and-a-half month high of 28,234.29 points.
In the U.S., benchmark 10-year Treasury bond yields rose to 3.029% in New York trading while the dollar index rose 0.15% against a basket of six global currencies to 102.48 in early European trading.
Intel (INTC) shares were an active name falling 5% after analysts at Citigroup cautioned that the chipmaker could pre-announce weaker-than-expected second quarter earnings and lowered their near-term profit estimates.
Roku (ROKU) shares ended 9% higher following a report that linked the streaming service hub to a potential takeover by Netflix (NFLX).
Novavax (NVAX) shares rose 5.4% after an advisory panel to the U.S. Food and Drug Administration recommended granting Emergency Use Authorization for the group's Covid vaccine for patients over the age of eighteen.
Western Digital Corp. (WDC) shares were also on the move, falling 4% after the chipmaker said it would launch a review of its strategic options following a renewed push by activist investors for the sale of its flash memory business.
