Stocks fell sharply on Tuesday following the release of a hotter-than-expected key August inflation report, hurting investor optimism about lower prices and a less aggressive Federal Reserve.
The Dow Jones Industrial Average slipped 830 points, or 2.6%. The S&P 500 fell about 2.9% and the Nasdaq Composite fell 3.6%. More than 490 S&P 500 stocks fell, with Facebook’s parent company Meta losing 7.9% and Caesars Entertainment losing 7.3%.
The decline erased much of the recent rally in stocks, but the S&P 500 is still up about 2% from its Sept. 6 close at 3,908 and comfortably above its mid-June levels. , when it fell below 3,700.
“The speed of this move has been mind-boggling, but the market has recovered significantly from recent lows. The fact that this 4,000 level holds for the S&P 500 speaks to the fact that markets are confused, but markets don’t panic,” Jeff said. Kilburg, founder and CEO of KKM Financial.
The August Consumer Price Index report showed a higher than expected reading for inflation. Headline inflation rose 0.1% month-over-month, even with lower gasoline prices. Core inflation rose 0.6% month-on-month. On an annual basis, inflation was 8.3%.
Economists polled by Dow Jones expected headline inflation to fall 0.1%, with core inflation rising 0.3%.
The report is one of the last the Fed will see ahead of its September 20-21 meeting, when the central bank is expected to make its third consecutive 0.75 percentage point hike in interest rates to stem the tide. ‘inflation. August’s surprisingly high report could lead the Fed to continue its aggressive hikes for longer than some investors expected.
The move comes after four consecutive positive sessions for US equities, which were partly bolstered by the belief among many investors that inflation had already peaked.
“The CPI report was an unequivocal negative for equity markets. The warmer than expected report means we will face continued pressure from Fed policy via rate hikes,” said Matt Peron , director of research at Janus Henderson Investors. “It also pushes back any ‘Fed pivot’ that the markets were hoping for in the near term. As we have warned over the past few months, we are not out of the woods yet and will maintain a defensive posture with allocations. in stocks and sectors.”
The sell-off was particularly painful in high-growth tech stocks. Cloudflare fell about 10%, while Unity Software fell more than 11%. Shares of direct-to-consumer auto retailer Carvana fell more than 12%, making it one of the worst performers on the New York Stock Exchange.
