Dow Jones Falls Over 500 Points As Consumer Price Index See Highest Increase Since 1981

The Nasdaq composite led the downside again in Friday’s market while the Dow Jones and S&P 500 opened well over 1% lower. Stocks continued lower on this morning’s inflation report, compounding weekly losses in the major indexes.

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Dow Jones Today

The Dow Jones Industrial Average opened over 550 points lower, trading down 1.7%. The S&P 500 fell 1.8% while the small-cap Russell 2000 was down 2.1%. The tech-heavy Nasdaq composite fell 1.9%. Volume was slightly higher on the Nasdaq and on the NYSE vs. the same time on Thursday.

Stocks sold off again early Friday, and indexes are on track to close lower this week. The Dow Jones and other major U.S. indexes all moved below their 21-day exponential moving averages on Thursday, a bearish sign.

Consumer Price Index Sees Highest Increase Since 1981

Concerning economic news played a role in Friday’s sell-off. The Bureau of Labor Statistics’ consumer price index jumped 1% in May, the second largest leap since 2008, exceeded only by the CPI increase for the month of March. Economists expected the yearly rate to hold steady. A year-over-year increase of 8.6% for May was higher than April’s 8.3% rise. It was also the highest since December 1981.

“Basically everything is soaring in cost. Core prices popped 0.6% for a second straight month,” said Sal Guatieri, senior economist at BMO Capital Markets. “Most depressing, after dipping in the past three months, used vehicle prices jumped 1.8% in May (from the prior month). And rents are screaming higher due to frothy house prices.” Guatieri warned it’s unlikely people will see relief in energy, rents or food prices for some time.

The news only compounded yesterday’s data from Mortgage buyer Freddie Mac. The mortgage lender reported Thursday that the 30-year rate jumped to 5.23% this week from 5.09% last week, well above a rate of around 3% a year ago. Last month, the average rate exceeded 5% for the first time in over a decade.

Looking ahead, investors are gearing up for next week’s Federal Reserve meeting, when it’s expected the Fed will raise its main borrowing rate by 50 basis points.

Outside Dow Jones: IBD 50 Stocks To Watch

IBD 50 leader Li Auto (LI) bucked the trend and rose over 2% in early trading. The stock was among only a handful of names trading higher. On the downside, Builders FirstSource (BLDR) fell over 6% in heavy volume and is now below support at the 50-day line.

Fellow construction products manufacturer Atkore (ATKR) also traded lower. Shares lost 3.5% and triggered the 7%-8% sell rule from a 112.34 double-bottom buy point. The initial breakout was messy and has failed twice now. The stock was removed from IBD’s Leaderboard.

Agricultural firm Darling Ingredients (DAR) also triggered the 7% sell signal Friday after tumbling over 4%. Shares gapped lower after breaking out above an 85.02 buy point of a cup-with-handle base this week. Still, shares are holding up, getting support at the 50-day line.

Oil prices fell slightly but remained above $120 per barrel. Oil and gas exploration firm HighPeak Energy (HPK) was also one of the few names in the IBD 50 to hold gains. Shares were up 2% while the stock’s RS line hit a new high. HighPeak is currently 6% below a 38.31 entry.

Follow Rachel Fox on Twitter at @IBD_RFox for more Dow Jones and stock market commentary.

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