Stocks dropped Thursday after new data on consumer spending revealed that Americans are cutting back on spending due to high inflation.
According to the government, consumer spending increased at a slow 0.2% rate between April and May. This is despite high inflation. American households and the working- and middle class are under severe financial pressure due to the fastest price rises in 40 years.
The government confirmed Wednesday that the U.S. economy contracted 1.6% in the quarter ended March 31, downgrading an earlier estimate.
Investors are worried about signs that the largest global economy could be in recession because of interest rate increases imposed to reduce inflation.
Stephen Innes, of SPI Asset Management, stated that equity demand may remain muted over the next four- to six months while interest rate increases work through the U.S. Economy.
Jerome Powell, the Chair of the Federal Reserve, stated Wednesday at a European Central Bank meeting that there is no guarantee that inflation will be controlled without affecting the job market.
The U.S. unemployment benefit claims for the week ending June 25 were slightly lower that the week before. However, layoffs have increased from a low of 50 years in March. Recent cooling has seen more layoffs in sectors like technology, real estate, and cryptocurrency.
Russia's invasion in Ukraine has also roiled the global economy, pushing up the prices of oil, wheat, and other commodities.
On Thursday, the benchmark U.S. crude oil lost 96c to $108.82 per barrel in electronic trading on New York Mercantile Exchange.
