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Stock markets mostly retreated Thursday as fresh evidence of runaway global inflation ramped up expectations of more aggressive interest rate hikes by central banks, while disappointing earnings revived recession fears.
A day after data showing the biggest jump in US consumer prices in more than four decades, the Labor Department reported that US wholesale prices rose 1.1 percent, topping expectations, on a 10 percent surge in energy prices, more than double the increase in May.
Market watchers are now wondering whether the Federal Reserve could hike US borrowing costs by a full percentage point at a scheduled policy meeting this month.
Meanwhile, results from JPMorgan Chase lagged estimates as the banking giant reported a 28 percent drop in quarterly earnings and set aside additional funds in case of bad loans.
The disappointing results from JPMorgan and from Morgan Stanley underscore "that now we're entering the process of the very real possibility of an earnings recession," said Adam Sarhan of 50 Park Investments, referring to the possibility of two consecutive quarters of lower profits compared to the same three months of the prior year.
"That could lead to lower (stock) prices," Sarhan said. "Because first things slowed down on Main Street, and then you see earnings slow down on Wall Street."
The Dow and S&P 500 each finished with modest losses after starting the day sharply lower, staging a rebound as investors grabbed a bargain-hunting opportunity.
Also Thursday, the European Commission slashed its growth forecast for the region in light of the Ukraine invasion and the risks to the region's energy supply, and said eurozone inflation will end the year at 7.6 percent, much higher than previously estimated.
The forecasts "depend heavily on the evolution of the war and in particular its implications for Europe's gas supply," the commission said. "Further increases in gas prices could further raise inflation and stifle growth."
Europe's main stock indices finished more than one percent lower, with Milan slumping more than three percent amid political turmoil in Italy.
Italy's teetering government was thrown a lifeline late Thursday after the country's president refused to accept the resignation of Prime Minister Mario Draghi.
The crisis comes as Italy battles raging inflation and races to push through key reforms required by the European Union in exchange for post-pandemic funds.
Elsewhere, the euro fell back below parity with the US dollar once again shortly after US markets opened, before bouncing back.
- Key figures at around 2050 GMT -
New York - Dow: DOWN 0.5 percent at 30,630.17 (close)
New York - S&P 500: DOWN 0.3 percent at 3,790.38 (close)
New York - Nasdaq: UP less than 0.1 percent at 11,251.19 (close)
London - FTSE 100: DOWN 1.6 percent at 7,039.81 (close)
Frankfurt - DAX: DOWN 1.9 percent at 12,519.66 (close)
Paris - CAC 40: DOWN 1.4 percent at 5,915.41 (close)
EURO STOXX 50: DOWN 1.7 percent at 3,396.61 (close)
Tokyo - Nikkei 225: UP 0.6 percent at 26,643.39 (close)
Hong Kong - Hang Seng Index: DOWN 0.2 percent at 20,751.21 (close)
Shanghai - Composite: DOWN 0.1 percent at 3,281.74 (close)
Euro/dollar: DOWN at $1.0022 from $1.0059 Wednesday
Pound/dollar: DOWN at $1.1826 from $1.1889
Euro/pound: UP at 84.72 pence from 84.61 pence
Dollar/yen: UP at 138.93 yen from 138.20 yen
West Texas Intermediate: DOWN 0.5 percent at $95.78 per barrel
Brent North Sea crude: DOWN 0.5 percent at $99.10 per barrel
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