US Stocks Plunge as Inflation Worries Mount
US stocks plummeted on Wednesday as investors grappled with a strong economy and soaring inflation. The S&P 500 sank 0.7% after finishing the previous day just 0.4% below its record set last month. The Dow Jones Industrial Average dropped 299 points, or 0.6%, while the Nasdaq composite fell 1.1% from its own all-time high.
The bond market's pressure on Wall Street intensified after a surprisingly strong report on economic growth raised concerns about inflation. The yield on the 10-year Treasury jumped to 5.12% from 4.96% late Tuesday, which is a significant move for the bond market. High yields undercut prices for stocks and other investments, while also slowing the economy by making it more expensive for everyone to borrow money.
Worries about inflation got a boost Wednesday morning after a preliminary report suggested growth in US business activity surged to its strongest level in over five years. That's an encouraging signal, but it also indicates the economy may have plenty of fuel for more inflation. The report also showed costs for businesses are rising at their fastest rate in four years, partly due to expensive oil.
Fuel prices remain high because oil is expensive, mainly due to concerns that the war with Iran will keep oil bottled up in the Middle East for a long time. The price for a barrel of Brent oil to be delivered in November rose 3.5% to $102.78 after climbing as high as $103.12 earlier on Wednesday.