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It was another weekly loss for the stock market, with all major stock market indexes finishing in the red. The driving force behind the losses was inflation, the Federal Reserve, and the fear of a recession.

On Tuesday, the Bureau of Labor Statistics reported that wholesale prices continued to climb in May, adding to the inflationary pressures on the markets. The headline producer price index (PPI) increased 0.8 percent for May and is at 10.8 percent year-over-year.

May’s increase was in line with estimates and doubled the April increase of 0.4 percent. The producer price index is a measure of prices paid to the producers of goods and services.

Excluding energy, food, and trade, the core PPI increased 0.5 percent for May, a little below the 0.6 percent that was estimated. Year-over-year, the core PPI is up 6.8 percent. The producer price index and core PPI continued at near historical highs of 11.5 percent for the headline PPI and 7.1 percent for the core PPI, which occurred in March of this year.

On Wednesday, the Federal Reserve announced a rate hike of 75 basis points, the most aggressive interest rate hike since 1994. This move brings the federal funds rate to the highest it has been since right before the pandemic.

Federal Reserve Chairman Jerome Powell said that he expects another rate hike increase of 50 or 75 basis points at the July meeting but does not expect these aggressive 75 basis point moves to be common.

According to the FOMC member’s expectations, the Federal Reserve’s benchmark will end the year at 3.8 percent, its highest level since late 2007. That is an upward revision of 1.5 points since March.

The economic growth outlook for 2022 was cut significantly. It is now believed that growth will only show a gain of 1.7 percent in GDP, down from the 2.8 percent expectation in March.

On a positive note, it appears economic activity has picked up. Job gains have been strong in the past several months, and the unemployment rate is still low. Economic activity is expected to stay strong even with inflation high.

At first, the markets were not bothered by the announcement as the Dow Jones Industrial Average jumped 400 points, and the Nasdaq was up more than 3 percent. But by Thursday morning, the fear of recession hit the markets again, and the selling picked up.

The sell-off on Thursday didn’t spare any sector, as all 11 market sectors closed in the red. For the day, the Dow Jones Industrial Average closed down 741.46 points or 2.42 percent, the S&P 500 was down 3.25 percent, and the Nasdaq lost 4.08 percent.

The loss on the Nasdaq was the fifth decline of 4 percent or more since the start of May. Even though the markets were fairly quiet on Friday, the S&P 500 recorded its worst week since March 2020.

For the week, the Dow Jones Industrial Average was down 4.8 percent and is now down 17.7 percent for the year. The S&P 500 lost 5.8 percent for the week and is now down 22.9 percent for the year. The Nasdaq lost 4.8 percent last week and is down 27.5 percent year-to-date.

With expectations that the Federal Reserve will be raising rates again, yields on U.S. government bonds hit their highest levels in more than a decade. The yield on the 10-year Treasury note closed at 3.371 percent, the highest close since April 2011. The yield on the 2-year Treasury closed at 3.3 percent, its highest level since 2007.

Both bonds retreated towards the end of the week, with the 10-year closing Friday at 3.23 percent and the 2-year closed at 3.17 percent.

Mortgage rates continued to jump as the 30-year fixed-rate mortgage hit 6.28 percent. One week ago, the 30-year fixed-rate mortgage was at 5.5 percent. Even with the rising mortgage rates, home prices remain at record high levels.

Rising rates and high home prices are causing home builders to have less confidence that they will be able to sell homes if they build them, even though the U.S. is still short 4 million homes to meet the current demand.

Oil dropped to a four-week low last week because of the strong U.S. dollar and worries of a recession. West Texas Intermediate closed the week down 9.8 percent at $108.80 but is still up 44.7 percent for the year.

The May CPI report caused a sell-off in the markets on Friday, with the Dow Jones Industrial Average losing 880 points or 2.73 percent. The S&P 500 lost 2.91 percent, while the Nasdaq fell 3.52 percent for the day.

Almost every stock on the Dow ended up in the red on Friday. Losers outnumbered winning stocks by more than 5 to 1 on the New York Stock Exchange.

This was the 10th out of the past 11 weeks the DJIA has seen a negative return. Last week was the 9th week out of the past ten weeks that the S&P 500 and the Nasdaq lost ground, and the worst week since January.

For the week, the Dow lost 4.58 percent, the S&P 500 lost 5.05 percent, and the Nasdaq lost another 5.60 percent. For the year, the Dow is down 13.6 percent, and the S&P 500 is down 18.2 percent. Year-to-date, the Nasdaq composite is now down 27.5 percent.

The bond market is down 9.8 percent for the year. The 10-year Treasury closed the week at 3.165 percent, and the 2-year Treasury ended the week at 3.067 percent.

Oil continues its upward climb, closing the week at $120.47 per barrel for West Texas Intermediary. The national average for gas has now gone above $5 per gallon. The higher gas prices now cost Americans about $160 more per month than a year ago.

The much-anticipated consumer price index numbers released on Friday were not pretty. The report showed that inflation worsened, when it was hoped that the numbers would show inflation slowing.

The consumer price index (CPI) showed an 8.6 percent increase in prices, more than the predicted increase of 8.3 percent. That is the fastest increase since December 1981. Taking out the more volatile food and energy prices, the core consumer price index (core CPI) was 6 percent, slightly higher than the 5.9 percent estimate. The CPI was up 1 percent over last month, and the core CPI showed an increase of 0.6 percent.

Housing or shelter prices, which account for one-third of the CPI, increased 0.6 percent, the fastest one-month gain since March 2004. Shelter costs showed a 12-month increase of 5.5 percent, the most since February 1991.

Energy prices increase 3.9 percent from a month ago, for an annual gain of 34.6 percent. In the energy category, fuel oil showed the biggest gain of 3.9 percent over a month ago, bringing the annual increase to 106.7 percent.

And, as if we didn’t already know, food prices increased another 1.2 percent in May and a year-over-year gain of 10.1 percent.

These numbers mean that workers took another pay cut during April since inflation cuts into paychecks. When accounting for inflation, real wages dropped 0.6 percent in April, even though the report showed that the average hourly earnings rose 0.3 percent. According to the Bureau of Labor Statistics, real average hourly earnings were down 3 percent on a 12-month basis.

Last Friday’s CPI report cooled off hopes that inflation had peaked already and increased fears that a recession is next for the U.S. economy. The report makes it almost a certainty that the Federal Reserve will raise rates another 50 basis points at their next meeting in June.

The Atlanta Fed GDPNow Tracker predicts an annualized gain in the GDP of 0.9 percent for the second quarter, raising fears that it could be worse and lead to a recession. Because of the surprising 1.5 percent drop in GDP for the first quarter, the second quarter could easily come in negative.

On Thursday, the initial jobless claims jumped to their highest level since mid-January. First-time unemployment filings for the week ending June 4 came in at 229,000, with an increase of 27,000. Despite the rise, the employment picture is still strong, with the four-week moving average at its lowest level since January 10, 1970.

Mortgage rates jumped again last week ahead of this week’s Federal Reserve meeting. The average 30-year mortgage climbed to 5.23 percent, up from 5.09 percent last week. A year ago, at this time, the average rate was 2.96 percent.