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By Herbert Lash
NEW YORK (Reuters) -U.S. and European stocks slid on Wednesday as the outlook for rate hikes sullied sentiment, while bond yields rose after euro-zone gross domestic product beat expectations, adding to bets of a more hawkish European Central Bank.
Trading was choppy as investors awaited an ECB meeting on Thursday and U.S. consumer price data on Friday that will highlight the dilemma they face. As central banks tighten policy to tame inflation, it could spark an economic slowdown.
The White House said it expected the headline inflation number on Friday to be "elevated." Economists expect annual inflation to be 8.3%, according to a Reuters poll.
Adding to inflation concerns was a surge in crude oil to 13-week highs, while Exxon Mobil shares closed at a new record for the first time since 2014.
Investors are worried about the economic outlook and its effect on results. Citi Research analysts cautioned that Intel Corp could pre-announce weaker-than-expected earnings for the second quarter. Intel's shares fell 5.3%.
Target roiled markets on Tuesday when the retailer cut its profit margin forecast after reporting a much steeper drop in quarterly profit in May than expected. Other companies will follow and challenge second-quarter results, said Philip Orlando, chief equity market strategist at Federated Hermes.
"The market is rolling over here and will at a minimum retest that 3,800 level that we saw in early May over the course of the next couple of months, and it may go a little bit below that," he said. He called the recent rally a dead-cat bounce.
The S&P 500 almost confirmed a bear market when it slid more than 20% from its record closing peak on Jan. 3 to an intraday low of 3,810.32 on May 20, but the benchmark closed higher.
The pan-European STOXX 600 index fell 0.57% as concerns about growth weighed on banking shares, while MSCI's gauge of stocks across the globe fell 0.56%.
On Wall Street, the Dow Jones Industrial Average fell 0.81%, the S&P 500 lost 1.08% and the Nasdaq Composite dropped 0.73%.
Data showed the euro zone economy grew much faster in this year's first quarter than the previous three months, despite the war in Ukraine, the European Union statistics office said, as it revised earlier estimates sharply higher.
Investors raised their bets on ECB rate hikes, and money markets priced in 75 basis points of rate hikes by September.
German and U.S. Treasury yields rose after the euro area GDP data beat expectations, adding to bets of a more hawkish ECB.
The yield on 10-year Treasury notes rose 6.6 basis points to 3.036%. Yields also rose on tepid demand for the sale of $33 billion in 10-year notes.