Stock markets on Wednesday extended losses from the beginning of the week following the release of a government report showing unexpectedly high inflation.
The Dow Jones Industrial Average closed down 682 points, or 2 percent, while the S&P 500 fell 89 points, or 2.1 percent. The Nasdaq composite was down 358 points, or 2.7 percent, as drops in tech valuations pulled down the index.
The past two trading days have seen a significant retreat after new records were set as recently as midday Monday, when the Dow surpassed 35,000 for the first time. By Wednesday’s close, it was down to 33,588, a cumulative drop of 4 percent.
Wednesday’s decline followed the release of a Labor Department report showing inflation rose 0.8 percent in April, above Wall Street’s expectations.
The annual 4.2 percent increase was the fastest since 2008, reflecting in part how prices were significantly lower in the early stages of the pandemic.
Republicans have warned that President Biden’s plans for multitrillion-dollar spending bills could lead to a cycle of inflation, though the White House and Federal Reserve have said the expected price bumps would likely be temporary.
Once supply chains are running at full strength again and able to meet the growing demand fueled by the recovery, they argue, inflation should subside.
Updated at 4:31 p.m.