Concerns over the CPI statistic cause Wall Street to decline at market close

In anticipation of the announcement of inflation data on Tuesday, investors stayed away from the stock market due to imminent recession concerns.

Earlier in the trading day, the three major U.S. market indices fluctuated between mild gains and losses. Nonetheless, when the Labor Department's Consumer Price Index report for Wednesday drew near and massive bank profits loomed later in the week, all three indices plummeted sharply.

"Investors are anticipating CPI and earnings announcements," said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company (NASDAQ:NWE) in Milwaukee, Wisconsin. Almost every day over the previous few months, inflation and recession fears have alternated.

Schutte commented, "We have considerably perplexed the investors who have chosen to embark on a buyers' strike." "I seldom hear folks say 'buy the dip'."

It is predicted that the CPI data would suggest that inflation rose in June. The so-called "core" CPI, which excludes volatile food and energy prices, is expected to give fresh evidence that inflation has peaked, which might persuade the Federal Reserve to relax policy tightening in the autumn.

Paul Kim, CEO of Simplify ETFs in New York, believes that year-over-year headline CPI will be in the high eight or maybe nine percentage point range, and with inflation that high, the Fed has only one goal.

The steepest inversion of the 2 year and 10 year Treasury yields since at least March 2010, a potential indicator of near-term risk and economic contraction, exacerbated concerns that the Federal Reserve's overly aggressive efforts to rein in decades-high inflation could push the economy into recession.

At the conclusion of its policy meeting in July, the market believes that the central bank will raise the Fed funds target rate by 75 basis points, which would be the third consecutive increase in interest rates.

The Dow Jones Industrial Average dropped 192.51 points, or 0.62 percent, to 30,981.33, while the S&P 500 dropped 35.63 points, or 0.92 percent, to 3,818.8 and the Nasdaq Composite dropped 107.87 points, or 0.95 percent, to 11,264.73.

Among the eleven key sectors of the S&P 500, which all dropped, energy shares saw the greatest percentage loss due to falling oil prices. 

Before the end of the week, JPMorgan Chase & Co (NYSE:JPM), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C), and Wells Fargo & Co (NYSE:WFC) will all report their second-quarter results.

According to Refinitiv, analysts expected annual S&P profit growth of 5.7% for the period of April to June as of Friday, a decline from the 6.8% forecast at the beginning of the quarter.

PepsiCo (NASDAQ:PEP) kicked off the week by smashing quarterly profit estimates and stating it may increase prices in response to healthy demand.

Boeing (NYSE:BA) shares increased 7.4% after the aircraft manufacturer's June deliveries hit the highest level since March 2019.

The S&P 1500 Air Lines index climbed by 6.1% in response to this news and falling oil prices.

The stock price of apparel retailer Gap Inc (NYSE:GPS) fell 5% after the firm announced the retirement of its CEO and that second-quarter profits will continue under pressure owing to higher input costs.

Following the CEO's remarks on macroeconomic issues and currency constraints, shares of software provider Service Now dropped 12.7%. Other software companies, such as Salesforce.com (NYSE:CRM), Paycom (NYSE:PAYC), Intuit (NASDAQ:INTU), and Microsoft (NASDAQ:MSFT), also saw a decrease.

On the NYSE, falling issues outnumbered rising ones by a ratio of 1.37-to-1, while on the Nasdaq, the ratio was 1.19-to-1.

The S&P 500 had one new 52-week high and thirty new lows, while the Nasdaq Composite recorded thirteen new highs and one hundred and fifty new lows.

The volume on U.S. exchanges was 9.86 billion shares, compared to the 20-day average volume of 12.79 billion shares.