Updated at 4:15 pm EST
Stocks finished lower Thursday as global stocks closed out their worst first-half start on record amid concerns that central bank rate hikes, aimed at taming inflation, will instead tip major world economies into recession.
That view was largely underscored by comments from Federal Reserve Chairman Jerome Powell, who told a conference of central bankers in Portugal that failing to restore price stability would be a bigger risk to the global economy than a recession triggered by rate hikes.
"The process is highly likely to involve some pain but the worst pain would be from failing to address this high inflation and allowing it to become persistent," Powell told the European Central Bank's annual policy forum in Sintra.
The Federal Reserve's preferred measure of U.S. inflation eased for a second month in May, data indicated Thursday, but the report noted consumer prices pressures continue to be holding back spending in the world's biggest economy.
The report's tally on consumer spending also echoed Commerce Department data on retail sales and indicate a pullback in discretionary spending, a key component of growth in the services-driven U.S. economy.
The prospect of slower growth, which is now evident in data from a host of economic sectors, as well as the increasingly gloomy outlook from corporate America, has pulled U.S. stocks into a tailspin: the S&P 500, on pace for its worst start to any year since 1970, is trading firmly in bear market territory while interest-rate sensitive tech stocks are down more than 30% from their late November peak.
And still, the rate hikes keep coming. Sweden's Riksbank boosted its key lending rate by 50 basis points this morning, taking it to 0.75%, and bets on a similar-sized hike by the ECB next month are beginning to rise.
Cleveland Federal Reserve Bank President Loretta Mester told CNBC Wednesday that she would back a 75 basis point rate increase next month if economic conditions remain the same. The CME Group's FedWatch puts that chances of a move that size at 82%.
Heading into the final trading session of the first half, European stocks are down the most in more than two weeks, with the Stoxx 600 falling 2.35% in late-day trading in Frankfurt.
Overnight in Asia, the region-wide MSCI ex-Japan index slumped 1.07%, while Japan's Nikkei 225 fell 1.54%, with each benchmark pulling global stocks into a bear market and their worst first half start on record.
In the U.S., benchmark 10-year note yields fell to as low as 2.985% in New York trading, while 2-year notes hovered at around 2.947%.
On Wall Street, the S&P 500 posted its worst first half since 1970, finishing down 0.87%, while the Dow Jones Industrial Average slumped 253 points, or 87%, to 3,785. The tech-focused Nasdaq fell lost 1.33%
Walgreens (WBA) - Get Walgreens Boots Alliance Inc. Report fell 7.3% after it posted better-than-expected third quarter earnings, while booking a $683 million charge linked to an opioid settlement with the state of Florida, amid weakening comparable sales for its U.S. pharmacy division.
Pfizer (PFE) - Get Pfizer Inc. Report rose 3.2% after it submitted a new application to the U.S. Food & Drug Administration seeking formal approval for the sale of its covid oral treatment Paxlovid, which is forecast to generate as much as $22 billion in sales for the pharma giant this year.
Bitcoin prices were also lower, falling nearly 7% on the session to $18,932.97, following a move by the U.S. Securities and Exchange Commission to reject a proposal from Grayscale to list a spot bitcoin ETF on the NYSE Arca exchange, setting up a potential legal battle with the country's biggest digital asset manager.