Stocks sink as inflation remains red hot

By CNN Business

Updated 6:28 p.m. ET, July 13, 2022
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2:50 p.m. ET, July 13, 2022

Biden maintains faith in the Fed despite surging inflation, White House economist says

From CNN Business' Matt Egan

US President Joe Biden and Chairman of the Federal Reserve Jerome Powell during a meeting in the Oval Office of the White House in May.
US President Joe Biden and Chairman of the Federal Reserve Jerome Powell during a meeting in the Oval Office of the White House in May. (Saul Loeb/AFP/Getty Images)

President Joe Biden remains confident in the Federal Reserve’s ability to get inflation under control even as the cost of living continues to spike, according to White House economist Jared Bernstein.

“The president obviously had great faith in members of the Fed board that he renominated and those added. Our faith in that team remains as strong as ever,” Bernstein told CNN in a phone interview.

In November, Biden renominated Jerome Powell to serve as chairman of the Fed. Powell was originally nominated in 2017 by former President Donald Trump.

Asked if he wishes the Powell-led Fed moved faster to address inflation, Bernstein punted. 

“There is a lot of chin-stroking punditry... I’m not going there,” he said.

Bernstein noted that the No. 1 point in Biden’s inflation-fighting agenda is respecting the independence of the Federal Reserve.

“History is littered with presidents interfering with Fed rate hike cycles,” he said, hinting at the infamous Fed-bashing by Trump. “This president has committed to stay out of that knitting.”

1:00 p.m. ET, July 13, 2022

Here's what's getting more expensive at the grocery store

From CNN Business' Danielle Wiener-Bronner

Food prices are still on the rise. In the 12-months ending in June, overall food prices rose 10.4%, the biggest annual increase since February 1981, according to data released Wednesday by the Bureau of Labor Statistics.

Grocery prices jumped 12.2% in the year ending in June, not adjusted for seasonal swings. In that period, nearly every individual item got more expensive, with some categories seeing dramatic increases. Eggs spiked 33.1%, flour jumped 19.2% and chicken went up 18.6%. Milk got 16.4% more expensive, and fruits and vegetables were 8.1% pricier.

Restaurant menu prices grew 7.7% in that time period.

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11:56 a.m. ET, July 13, 2022

A 'mild' recession is coming, Bank of America says

From CNN Business' Matt Egan

Bank of America is calling for a “mild” recession, not a more dramatic collapse like the Great Recession that began in late 2007.

Real GDP is expected to decline this year by 1.4%, before rebounding by 1% next year, Bank of America said.

The unemployment rate is projected to jump from the historically-low level of 3.6% today to 4.6%. However, that would be well below the April 2020 peak of nearly 15%.

By the end of next year, Bank of America expects the Federal Reserve to reverse course and begin cutting interest rates following a string of aggressive rate hikes aimed at taming inflation.

Other economists are more optimistic.

Goldman Sachs said this week the risk of a recession over the next year stands at just 30%, although it rises to nearly 50/50 odds over the next two years. The Wall Street bank said that despite market fears of an imminent recession, “We are doubtful that the economy is already in a recession.”

11:53 a.m. ET, July 13, 2022

Bank of America predicts US recession this year

From CNN Business' Matt Egan

The American economy is slowing more rapidly than feared because of high inflation. A recession is likely later this year, Bank of America warned on Wednesday.

This marks the first time Bank of America is outright forecasting a downturn since the pandemic erupted in early 2020. A growing number of major banks are predicting a recession this year or next, although others argue the US economy can still experience a “soft landing.”

“Momentum in the domestic economy clearly appears to be slowing. The inflation tax is taking out the ability of households to spend on discretionary items at a fast clip,” Bank of America economist Michael Gapen told CNN in a phone interview.

The Bank of America recession call was made prior to Wednesday’s worse-than-feared inflation report. Gapen said the consumer price index, which spiked by the most since November 1981, gives him a “little more” confidence that a recession will happen because it shows how broad the inflation problem is.

“You can’t say this is just an energy story,” he said.

11:26 a.m. ET, July 13, 2022

Markets recover slightly in late-morning trading

CNN Business' Nicole Goodkind

Traders work on the floor of the New York Stock Exchange during morning trading on July 13 in New York City. 
Traders work on the floor of the New York Stock Exchange during morning trading on July 13 in New York City.  (Michael M. Santiago/Getty Images)

US stocks took a hit this morning after a key inflation reading showed that prices continued to surge in June.

The data added to investors' fears that the Federal Reserve will get more aggressive in its fight to tame inflation.

The market is currently pricing in a 44% probability that the Federal Reserve will increase interest rates by 1% later this month. That would be the highest hike in modern history.

Still, stocks bounced back as they approached midday:

  • The Dow lost 141 points, or 0.4%, narrowing its early-morning loss of more than 300 points.
  • The S&P 500 was down 0.2%.
  • The Nasdaq Composite added 0.2%.
10:15 a.m. ET, July 13, 2022

Treasury yields jump on inflation report

CNN Business' Nicole Goodkind

US Treasury yields jumped following the release of Wednesday's hotter-than-expected inflation report.

Yields move in the opposite direction to prices, and today's pop comes as investors fear rising inflation will further hurt consumer growth -- and that the Federal Reserve will pursue more aggressive rate hikes, which could slow the economy.

"The bottom line is that this report keeps the Fed on its tightening path. ... Today's report is also consistent with our view that the 'inflation tax' will weigh on consumer spending, driving the economy into a mild recession," wrote analysts at Bank of America.

Overall, there's "not a like to like," they said.

The market is currently pricing in a 57% probability of a 1% Fed hike later this month.

  • The 10-year Treasury grew by 7 basis points to 3.03% on Wednesday morning.
  • The 2-year Treasury grew by 13 basis points to 3.2%.
  • The 30-year Treasury grew by 12 basis points to 3.16%
9:51 a.m. ET, July 13, 2022

4 key takeaways from today's red-hot inflation report

From CNN Business' David Goldman

A shopper walks through a grocery store in Washington, DC, on June 14. 
A shopper walks through a grocery store in Washington, DC, on June 14.  (Stefani Reynolds/AFP/Getty Images)

1. Inflation isn't going away anytime soon

"If the Fed was hoping to find signs that inflation is beginning to abate, they likely didn't find it in today's CPI report," said Jason Pride, chief investment officer of private wealth at Glenmede.

2. Inflation is hot across the board

Prices rose across the board -- inflation is not being driven higher by a few outliers.

3. Gas is falling, but that may not help

"The continued strong gains in the cost of housing and apparel ... must temper suggestions that hope for lower gasoline and energy bills will resolve inflation concerns in the near term," noted PNC Senior Economist Kurt Rankin.

4. The Fed is probably going to hike rates into a recession

"A faster pace of rate hikes ... increases the odds that a soft landing gives way to recession in the U.S.," Pride said. 
9:40 a.m. ET, July 13, 2022

Dow opens down 300 points on inflation report

CNN Business' Nicole Goodkind

US stocks slid on Wednesday morning after June inflation data came in hot with the year-over-year increase of 9.1% in the Consumer Price Index, the highest annual rise since November 1981.

"This was an eye-popping number. There's no sugar-coating 9% inflation," said Brian Jacobsen, senior investment strategist for Allspring Global Investments.

Investors are worried that the new data could incentivize the Federal Reserve to hike interest rates more than expected during their meeting later this month.

"Inflation is becoming entrenched and this is exactly what investors and central bankers worry about the most," said Jeffrey Roach, chief economist at LPL Financial. "The Fed will likely hike rates by 75 basis points later this month, especially since the job market is strong enough to support the front-loading of rate hikes."

The Dow lost 210 points, or 0.7%, on Wednesday.

The S&P 500 dropped by 0.9%.

The Nasdaq Composite fell 1.2%.  

9:13 a.m. ET, July 13, 2022

High prices hurt Delta earnings

From CNN Business' Chris Isidore

Delta Air Lines earned its biggest profit since the start of the pandemic in its latest quarter, but higher fuel costs, labor issues and service problems caused it to earn far less than investors expected.

The company reported Wednesday that it earned $735 million in the second quarter. Analysts surveyed by Refinitiv had expected earnings of $1.1 billion for the company.

Average fuel costs for Delta rose to $3.82 a gallon, up 37% from the first quarter and up 82% from the final quarter of 2021. Delta had previously told investors it expected to pay between $3.20 and $3.35 in the second quarter. It now expects to pay slightly less in the third quarter, with fuel costing between $3.45 and $3.60 a gallon.

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