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Why The Stock Market Continues to Fall

Barron’s “Why the Stock Markets Are Falling So Hard” by Teresa Rivas June 11th 2022 11:30 AM EDT

Read Barron’s for all the details

Summary by 2244

Data from the U.S. Bureau of Labor Statistics shows all items up 1.1% for the month of May (YOY) and 8.6% for last 12 months. The monthly changes by component was Food At Home 1.3%, Food Away from Home 0.7%, Energy Commodities 8.0%, Energy Services 3.4%, Commodities Less Food and Energy 0.4% and Services Less Energy Services 0.6%. See table below for the detailed data.

Data from U.S. Bureau of Labor Statistics shows Food CPI up 10% YOY, Items Less Food & Energy slightly more than 5% and Energy nearly 35%.

Last week was tough with the DJI - 4.6% (-13.6% YTD), the S&P500 -5.1% (-18.6 YTD) the NASDAQ -5.6% (-27,5% YTD).

By now, this seems like yesterday’s news.

What’s behind the continued onslaught?

The Retail Exchange Traded Fund XRT fell 5% on the news that Target said more discounts will now be needed to move merchandise. “The Technology Select Sector ETF (XLK)” also tumbled “7.5% over the last five days” on worries about the potential of more tech-regulation and that “sales of Apple’s (AAPL) hardware may be slowing These data send shock waves that other makers and retailers will also be compelled to shrink their margins to move inventory. Of course, having to discount thwarts retailer’s ability to raise prices to accommodate their own rising costs.

The May CPI news, announced on Friday, was 8.6% May YOY-the highest in 40 years dashing hopes that we’ve hit the peak of price inflation. Rising prices for essential goods and services equates to less discretionary spending. With the CPI being “more than two-thirds of U.S. gross domestic product” creates “fears that a slowdown will turn into a recession...” Adding to worries is the belief that the Federal Reserve will continue to raise interest rates which would likely further dampen demand. Of course, demand outstripping supply has been a component driving up prices.


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