NEW YORK, New York - U.S. stocks shattered on Wednesday, for the second day in a row as U.S. Labor Department data confirmed investors' worst fears - inflation has re-emerged and is surging.
U.S. consumer prices for goods and services jumped 0.8% in April, the biggest monthly acceleration in more than a decade. The year-over-year increase has now reached its fastest rate since the global financial crisis in 2008.
Wednesday's report from the U.S. Labor Department revealed sharply higher prices for food, clothing, and housing. A record 10% increase in the prices of used cars and trucks accounted for roughly a third of April's increases.
For the year to date, consumer prices have risen 4.2% - the fastest increase in 13 years (since a 4.9% rise was recorded for the year that ended in September 2008). Analysts had expected a reading of 3.6 percent.
While stocks went into freefall initially, late buying brought indices back, although still well down at the finish.
The Dow Jones plummeted 681.50 points or 1.99 percent to 33,587.66. The key index has now lost 1,156 points in just two days.
The Standard and Poors 500 did worst in percentage terms, diving 89.06 points or 2.14 percent to 4,063.04.
The Nasdaq Composite, percentage-wise, fared worst of all, shedding 357.75 points or 2.67 percent to 13,031.68.
Meantime U.S. Federal Reserve Board Vice Chairman Richard Clarida said Wednesday that the U.S. economy remains a "long way" from the central bank's inflation and employment goals.
"Notwithstanding the recent flow of encouraging macroeconomic data, the economy remains a long way from our goals, and it is likely to take some time for substantial further progress to be achieved," he said in remarks to the National Association for Business Economics International Symposium.
"Our guidance for interest rates and asset purchases ties the path of the federal funds rate and the size of the balance sheet to our employment and inflation goals. We are committed to using our full range of tools to support the economy for as long as it takes until the job is well and truly done," Clarida said.
The Federal Reserve has pledged to keep its benchmark interest rates unchanged at the record-low level of near-zero, while continuing its asset purchase program at least at the current pace of $120 billion a month until the economic recovery makes "substantial further progress."
The U.S. dollar soared Wednesday, sending major currencies into a dive. The euro fell sharply to 1.2072. The Australian dollar dropped a full cent to 0.7721, as did the New Zealand dollar to 0.7153. The British pound ended in New York Tuesday around 1.4052. The Japanese yen dived to 109.60. The Swiss franc crumbled to 0.9086.
In London, the FTSE 100 rose 0.82 percent. The German Dax gained 0.20 percent, while in Paris, France, the CAC 40 advanced 0.19 percent.
On Asian markets, in Tokyo, the Nikkei 225 shed 461.08 points or 1.61 percent to 28,147.51.
China's Shanghai Composite, going against the regional trend, edged up 20.91 points or 0.61 percent to 3,462.75.
In Hong Kong, the Hang Seng added 217.23 points or 0.78 percent to 28,231.04.In Australia, the big news was an announcement overnight, via the delivery of the 2021/22 Budget that international borders in Australia will remain closed until at least mid-next year. The shares of the national carrier Qantas dived 3.40 percent on the news, settling at $4.50 a share.
The Australian All Ordinaries declined 50.50 points or 0.67 percent to 7,281.10.