Dashed peak inflation hopes spell more pain for US stocks and bonds

With markets now betting policymakers will hike rates by at least 50 bps in their next three meetings, expectations of a less hawkish Fed are fading and investors believe more declines are on the way

Blistering inflation is threatening to reignite twin declines in U.S. stocks and bonds, leaving investors with few places to hide from a Federal Reserve that appears headed for its most aggressive policy tightening in decades.

Friday gave a hint of what investors may see in coming weeks. The benchmark S&P 500 index fell nearly 3% while yields on the benchmark 10-year Treasury hit their highest level since early May after stronger-than-expected inflation data ramped up forecasts for more aggressive Fed rate hikes later this year. Bond yields move inversely to prices.

"Today, the inflation data was disappointing. Many hopes for a peak