• 23 May 2022

Dow Jones slipped 3.57% during Wednesday’s trade which was the largest plunge since 2020. The CBOE (Chicago Board Options Exchange) volatility index increased 18.6% creating further fear in the markets. One of the major concerns is the rising inflation as the Federal Reserve Chair Jeremy Powell said that they would continue to hike interest rates by around 50 basis points or more in June and July. There is an expectation of 10 more rate hikes until inflation is under control.

The Consumer sector stocks such as Target Corp, Walmart, Gap Inc, Best Buy dropped around 4-11% due to supply chain disruptions and surging prices by increased input costs.The increase in interest rates will affect the retail industry as it will lead to a decrease in consumer expenditure. The Retail sales report for the week showed a 20% increase in yearly figures indicating that the expenditure has not yet dropped drastically.

The surge in Food and Energy prices are further affecting inflation due to a curb in Oil and Gas exports from western sanctioned Russia. The unemployment claims increased by 21,000 during the week which shows low economic performance. The poor earnings season by several market leaders also indicates a downturn.The focus is to avoid recession even if the economical growth is slow.

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- Vinati Jethra