US Stock Markets Ends the Week Dropping to Biggest Loss Under the Presidency of Trump on Fears of Federal Reserve Inflation

Photo by Gage Skidmore/Flickr

Last night, US stock markets ended the week with the largest single-day loss of the era of the Trump administration, as various investors adjusted their expectations on interest rates after labour market data revealed signs of an increase in inflation.

Over the day, the benchmark S&P 500 lost 2.12 percent, while the Dow Jones Industrial Average lost 2.54 percent.

The decline in stocks came after US payrolls data revealed an increase in wage inflation. According to the US Bureau of Labor Statistics, average hourly earnings grew by 2.9 percent in the year to January, the fastest movement since June of 2009.

The Federal Reserve has already warned regarding its lookout for a sustained pick-up in inflationary pressures. On Wednesday, the central bank of the United States said that inflation was likely to increase over the course of the year.

The signs of inflation also urged a sell-off in bond markets, with benchmark yields of the government of the United States increasing to their highest since 2014. Yesterday, the yield on the 10-year Treasury of the US hit a high of 2.8525 percent.

An analyst at City Index, Ken Odeluga, said that the plans of the Federal Reserve to increase rates three times in 2018 might likely be “vindicated by green shoots in personal income growth.” If the economy continues to stimulate amid a stronger global environment, “pay growth that’s finally catching up could force the Fed to hike faster than it foresees,” said Odeluga.