Stock Market Today

Stock Market Today: Dow Sinks 880 Points After Inflation Shocker

The University of Michigan's latest consumer sentiment index didn't help the bull case today, either.

Speculation that inflation might have peaked earlier this year died abruptly with this morning's release of the Labor Department's latest consumer price index (CPI). And what the data showed was that prices were still rising last month.

Specifically, the CPI surged 8.6% year-over-year in May, the fastest pace since December 1981. The sharp rise in consumer inflation was broad-based, but annual increases were particularly stunning in both gas prices (+50.3%) and groceries (+11.9%). On a month-over-month basis, the consumer price index was up 1%, compared to April's 0.3% rise in prices. Both figures were higher than what economists were expecting.

Also released this morning was the University of Michigan's preliminary consumer sentiment index for June, which arrived at 50.2 – down 14.2% from May, the lowest value this decades-old indicator has reported. According to the report, 46% of survey respondents pointed to inflation for their negative outlook toward the economy, up 38% from last month.

"The crash in sentiment means that consumers are more and more worried about future economic conditions," says Jeffrey Roach, chief economist for independent broker-dealer LPL Financial. "We need to listen to what consumers say but more importantly, we need to watch what consumers do. We do expect a slowdown in consumer spending as inflation and uncertainties weigh heavily on sentiment."

Sign up for Kiplinger's FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

The reports were met with sharp selling on Wall Street. All 11 sectors finished in the red, with consumer discretionary (-4.0%) and technology (-3.8%) suffering the biggest drops.

As for the major indexes, the Nasdaq Composite slid 3.5% to 11,340, the S&P 500 Index shed 2.9% to 3,900 and the Dow Jones Industrial Average skidded 2.7% to end at 31,392.

stock price chart 061022

YCharts

Other news in the stock market today:

  • The small-cap Russell 2000 slumped 2.7% to 1,800.
  • U.S. crude futures shed 0.7% to settle at $120.67 per barrel.
  • Gold futures jumped 1.2% to end at $1,875.50 an ounce.
  • Bitcoin sank 3.4% to $28,966.18. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) 
  • Netflix (NFLX, -5.1%) and Roblox (RBLX, -9.0%) posted sharp losses today after Goldman Sachs downgraded the stocks to Sell. "We downgrade NFLX to Sell as we have concerns around the impact of a consumer recession as well as heightened levels of competition on demand trends (both in the form of gross adds and churn), margin expansion and levels of content spend and view NFLX as a show-me story with a light catalyst path in the next 6-12 months," the analysts write in a note. And while they still view RBLX as the best-positioned name for long-term growth opportunities in the gaming/interactive universe, "we have increasing concerns around the post-pandemic environment and expect a continuation of slowing growth, tough comps, & normalization of margins in the near term."
  • DocuSign (DOCU) plummeted 24.5% after the e-signature firm reported earnings. In its first quarter, DOCU reported adjusted earnings per share of 38 cents on revenue of $588.7 million. Analysts, on average, were expecting earnings of 38 cents per share on $581.8 million in revenue. The company also lowered its full-year billings growth estimate to 7% to 8% from prior guidance for 15% growth at the midpoint. "DocuSign pegged the guide-down on a) macro headwinds (customers being cautious about volume expansions across all regions), b) sales execution (high sales rep turnover) c) customers that are still digesting excess capacity (pandemic distortions are still playing out in stocks) and d) a fall-off in rate-sensitive loan / mortgage e-signature volumes, impacting the financial/real estate verticals," says UBS Global Research analyst Karl Keirstead. "We remain on the sidelines with a Neutral rating."

The Best Stocks for Sky-High Inflation

We'll get a glimpse on how the Federal Reserve will respond to today's red-hot inflation update next week, with the central bank slated to unveil its latest policy decision Wednesday afternoon. 

"From a Fed perspective, the chase continues, and more aggressive Fed measures will likely be needed to catch up to runaway inflation," says Charlie Ripley, senior investment strategist for Allianz Investment Management.

"Whether this translates to more aggressive hikes this summer, or a continuation of 50 basis point [a basis point is one-one hundredth of a percentage point] hikes this fall is the option for the Fed, but the overall reality for the Fed is that inflation is not under control, and they have their work cut out for them in the coming months," Ripley adds.

We've mentioned several times in this space how investors can protect portfolios against inflation. For example, gaining exposure to firms with pricing power or scooping up Wall Street's best dividend stocks are two ways to help mitigate the effects of red-hot inflation on their portfolio. 

Investors can also drill down on sectors that are typically considered more "inflation-proof" than others – namely, healthcare, consumer staples, utilities and real estate. Here, we've selected some of the top stocks from each of these sectors to create a mini-portfolio that can stand up against higher prices. Take a look.

Most Popular

Top Bear Market Tips from 10 Financial Advisers
investing

Top Bear Market Tips from 10 Financial Advisers

When a bull market turns into a bear market, it can be hard to know what to do. Take comfort in the guidance of 10 financial professionals.
June 30, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 15 Best Stocks for the Rest of 2022
stocks to buy

The 15 Best Stocks for the Rest of 2022

The lesson of the past two years: Be ready for anything. Our 15 best stocks to buy for the rest of 2022 reflect several possible outcomes for the seco…
June 21, 2022

Recommended

Stock Market Today (7/1/22): Stocks Catch a Second Wind to Start Second Half
Stock Market Today

Stock Market Today (7/1/22): Stocks Catch a Second Wind to Start Second Half

Despite a dour ISM manufacturing index reading Friday, stocks broadly managed to pull themselves together and finish well in the black.
July 1, 2022
Is the Stock Market Closed for the Fourth of July in 2022?
Markets

Is the Stock Market Closed for the Fourth of July in 2022?

Independence Day falls on a Monday in 2022, so the bond and stock markets will enjoy a long holiday weekend. Here's a look at the markets' holiday hou…
July 1, 2022
Stock Market Today (6/30/22): S&P Suffers Worst First Half Since 1970
Stock Market Today

Stock Market Today (6/30/22): S&P Suffers Worst First Half Since 1970

The major indexes produced a familiar result Thursday, finishing in the red to close out a dreary first six months of the year.
June 30, 2022
Can AI Beat the Market? 10 Stocks to Watch
stocks

Can AI Beat the Market? 10 Stocks to Watch

An artificial intelligence (AI) system identifying high-potential equities has been sharp in the past. Here are its 10 top stocks to watch over the ne…
June 30, 2022