The consumer price Index (CPI) in June was released in the evening of yesterday (13). The annual increase rate reached 9.1%, the biggest increase since the end of 1981, higher than the market expectation of 8.8%, and higher than the 8.6% in May.
Core CPI, which excludes food and energy, rose at an annual rate of 5.9 percent, above expectations of 5.7 percent but down slightly from 6 percent in May.
The data reignited investors’ concerns about a slowing economy and lingering inflation.
Bitcoin plunged from $20,000 to $18,900 in 10 minutes, down more than 5.6%;
Fortunately, after a short period of strong selling pressure, the currency did not continue to lose ground and recovered its losses. As of press time, it is now trading at $20,247, back to the price level when the CPI was released last night.
Ethereum (ETH) earlier similarly rebounded to $1,110 by press time after falling 8.5 percent to just under $1,000.
The Dow Jones industrial Average fell as much as 466 points, but the four major indexes continued to pare losses and the PHLX Semiconductor Index was up 19.2 points at the close.
The Dow Jones industrial average lost 208.54 points (-0.67 percent) to 30,772.79.
The Nasdaq lost 17.15 points (-0.15%) to 11,247.58.
The S&P 500 lost 17.02 points (-0.45%) to 3,801.78.
The PHLX Semiconductor Index gained 19.2 points (+0.75%) to 2,577.4.
With the consumer price index at its highest level in nearly four decades, investors are betting heavily on a 100-basis-point rate hike at the Federal Reserve’s July 26-27 monetary policy meeting, according to CME’s FedWatchTool.
The odds of a 100 basis point hike have jumped from 7.6 percent on December 12 to 82.1 percent now, while the odds of a 75 basis point hike have plummeted to 17.9 percent from 92.4 percent.
In response to the continuing high inflation data, the White House had warned a few days ago that the CPI would rise sharply in June. But U.S. gasoline prices did recede recently, with average U.S. gasoline prices down 12 percent in July from June, suggesting the CPI has a chance to slow down from July.
U.S. President Joe Biden was also quick to say that while inflation is unacceptably high, the data is outdated and does not reflect the recent 30-day drop in oil prices, which have dropped about 40 cents since mid-June to give American families breathing room.
Mr. Biden, who is in Israel, is on a mission to persuade Saudi Arabia and other members of the Organization of Petroleum Exporting Countries (OPEC) to increase oil production.
Recession fears also sent Brent crude futures and U.S. West Texas crude futures lower this week, suggesting that inflation in the energy sector may ease.
Nobel Prize-winning economist Paul Krugman, in a series of tweets yesterday, also wrote: ‘Today’s soaring inflation numbers are outdated and don’t reflect lower gasoline prices and other factors that have recently reversed.’
Mr. Kluhmann said he doesn’t think CPI matters. What matters is what the Fed will do if market conditions improve.
He doesn’t think a Fed rate hike would do much harm to the U.S. economy before the next FOMC meeting if an improvement in underlying U.S. inflation prompts the Fed to shift to a dovish stance.
Overall, Klubman thinks the June CPI report may look bad at first because of statistical factors and the media’s focus on annual growth, but may actually be on the upswing.