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Wall Street Closes Sharply Lower as Inflation Fears Heat Up

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NEW YORK, May 12 Reuters Wall Street closed lower on Wednesday with the SP suffering its biggest oneday percentage drop since February, as inflation data fueled concerns over whether interest rate hikes from the Fed could happen sooner than anticipated.

All three major U.S. stock indexes ended the session deep in negative territory in the wake of the Labor Departments April consumer prices report, which showed the biggest rise in nearly 12 years.

The report, which measures the prices U.S. consumers pay for a basket of goods, was hotly anticipated by market participants who have grown increasingly worried over whether current price jumps will defy the U.S. Federal Reserves reassurances by morphing into longterm inflation.

But pentup demand from consumers flush with stimulus and savings is colliding with a supply drought, sending commodity prices spiking, while a labor shortage drives wages higher.

The topic on everyones mind is obviously inflation, said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. Its something the Fed has been looking for and theyre finally getting their wish.

The question is how long will its fires run hot before starting to simmer?

That concern is shared by Stuart Cole, head macro economist at Equiti Capital in London.

Going forward, the big question is just how long can the Fed maintain its dovish stance in opposition to the markets, Cole said. Particularly if companies begin raising…

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