Market plunges sharply

Wall Street fears of rising inflation in the US came true when the government reported a 4.2% jump in consumer price growth in April, the worst rate in 12 years. US stock indices reacted with a sharp fall. The fall in the Dow Jones and S&P 500 was the biggest since February, with the Nasdaq Composite falling 2.6%.

The drop in US stock exchanges on Thursday was one of the biggest since the beginning of the year. The reason was data from the Labour Department showing inflation, as measured by the consumer price index, rising to 4.2% in April, up from 2.6% in March and above market expectations of 3.6%. This is the fastest rate of inflation in the US in more than 12 years and investors are concerned that the situation could undermine economic growth in the country. Rising prices could reduce consumer spending by Americans, on which two-thirds of the economy is based, as well as lower corporate incomes and profits. Wall Street is concerned that the US Federal Reserve, which is now sticking to its zero interest rate policy, could go for tightening measures, which would be reflected in a downturn in the stock market.

The Dow Jones fell 681 points on Thursday, or 1.99%, down -3.4% for the week, the S&P 500 index lost 2.1% and 4% on Thursday and last week respectively and the Nasdaq Composite index of technology companies fell 2.6% on Thursday, a weekly loss of 5.24%.

Shares in the technology sector were the biggest losers, with Microsoft (MSFT) and Apple (AAPL) down 2.94% and 2.5% respectively, while the communications, financial, consumer, healthcare and other sectors also suffered.

Experts expect volatility to persist at least in the coming days until new announcements from the Fed that one month's worth of data will not change its policy.