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Shares fall when Dimon warns of ‘negative consequences’ from inflation, Fed

US stocks fell at the opening of the stock exchange on Thursday as investors enjoyed shock inflation data and digested income from some of Wall Street’s major banks.

The S&P 500 and Dow both fell 1.9% shortly after opening, while the technology-heavy Nasdaq was down nearly 1.7% in early trading.

JPMorgan Chase (JPM) was in the spotlight early Thursday after reporting a wider-than-expected decline in second-quarter profit of 28%, attributing the decline to a $ 1.1 billion provision for credit losses due to concerns about a possible economic downturn . The shares fell as much as 5% at the start of trading on Thursday.

“In our global economy, we are dealing with two conflicting factors, operating on different schedules,”[ads1]; said CEO Jamie Dimon. “The US economy continues to grow and both the labor market and consumer spending, and their ability to spend, remain healthy.”

Shares fall when Dimon warns of ‘negative consequences’ from inflation, Fed

JPMorgan Chase CEO Jamie Dimon Speaks at North America’s Building Trades Union (NABTU) 2019 Legislative Conference in Washington, USA, April 9, 2019. REUTERS / Jeenah Moon

“But geopolitical tensions, high inflation, declining consumer confidence, uncertainty about how high interest rates must go and the unprecedented quantitative easing and their effects on global liquidity, combined with the war in Ukraine and its detrimental effect on global energy and food prices will most likely have negative consequences for the global economy once on the road, “added Dimon.

Morgan Stanley (MS) revealed results that missed analysts’ expectations, mainly driven by a decline in investment banking income due to volatile market conditions. Shares fell above 2% early Thursday.

These results also weighed on the broader financial sector, sending shares of banking companies Citi (C) and Wells Fargo (WFC) down over 2% in early trading ahead of their own earnings on Friday.

Movements across the stock markets come after all three major indices fell on Wednesday after recent CPI data showed that prices across the US economy rose at the fastest pace since 1981.

Elsewhere on Thursday morning, the first demands for unemployment increased last week, as a potential sign that the labor market may cool down as the Federal Reserve tightens economic conditions.

First-time applications for unemployment insurance in the United States increased to 244,000 in the week ending July 9, up from 9,000 from the previous period, data from the Department of Labor showed Thursday morning. Economists surveyed by Bloomberg had expected the latest figure to reach 235,000.

The producer price index for final demand – a measure of wholesale and corporate prices – rose by 11.3% year-on-year in June and 1.1% from the previous month, the Ministry of Labor also reported on Thursday, emphasizing wholesale inflationary pressures.

Meanwhile, commodity markets were still under pressure due to growing concerns about a supply crisis. West Texas Intermediate (WTI) crude oil futures fell $ 2.24, or 2.33% to $ 94.06 per barrel in early trading, and Brent Crude Oil fell $ 1.94, or 1.95%, to $ 97.63.

“The markets had a knee-jerk reaction to the conspicuous inflation figures and the headline figure of 9.1% only makes the job so much harder for the Fed,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “As a result, the Fed is likely to send a hawkish message at the July meeting, and it would be a mistake to think that an interest rate hike of less than 75 basis points is in the cards.”

The blowout headline even spurred a wave of speculation among strategists that an increase of 100 basis points may now be on the table – a move that will mark the most belligerent monetary intervention since the early 1990s.

“Everything is at stake,” Atlanta Fed President Raphael Bostic told reporters in St. Petersburg, Florida on Wednesday. Asked if that included raising interest rates by a full percentage point, he said, “that would mean everything.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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