Wall Street Falls as Inflation Data Fuels Bets on Big Rate Hikes

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  • US consumer prices rise more than expected in August
  • Traders price in a slim chance of a 100 bps rate increase
  • Indices down: Dow 1.87%, S&P 2.30%, Nasdaq 3.07%

Sept 13 (Reuters) – U.S. stock indices fell sharply on Tuesday, snapping a four-day winning streak, after data showed monthly U.S. consumer prices reserve next week.

All 11 S&P sectors fell in early trading, led by a 3.3% drop in the communication services sector. (.SPLRCL). The Russell 2000 Small Cap Index (.RUT) fell 2.5%.

The S&P 500 Growth Stock Index (.IGX)which houses rate-sensitive growth and technology stocks, fell 3% as Treasury yields rose, while its value counterpart (.IVX) lost 1.6%.

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Large-Cap Tech Stocks Apple Inc. (AAPL.O) and Microsoft Corp. (MSFT.O) fell more than 2.3% each, while Tesla Inc. (TSLA.O)Alphabet Inc. (GOOGL.O)Amazon.com Inc. (AMZN.O) and Meta Platforms Inc. (META.O) it fell between 2.7% and 5.6% to weigh more on the S&P 500 and the Nasdaq.

The Labor Department’s consumer price index (CPI) report showed that the monthly CPI rose 0.1% in August from July, versus expectations for a 0.1% drop. In year-on-year terms it rose 8.3%, while economists were expecting an increase of 8.1%, according to a Reuters poll. read more

Excluding volatile food and energy components, the core CPI rose to 6.3% from 5.9% in July, putting more pressure on the Fed to continue its wave of rate hikes.

“The longer-term view is pretty clear here, that monetary policy is a very blunt instrument and anyone who thought that inflation would start to reverse just because the Fed went up a couple of times is pretty ignorant of the way monetary policy works. economy,” said Doug Fincher, portfolio manager at Ionic Capital Management.

Policymakers last week emphasized their determination to keep raising rates until there is a sustained decline in inflation, which has been at 40-year highs and above the Fed’s target of 2%.

Money markets now see an 81% chance of a 75bp rate hike and a 19% chance of a whopping 100bp hike by the Fed at its September 20-21 meeting, while rates are expected to peak at around 4.28% in March. 2023.

The dollar, which has risen strongly this year in part on expectations of aggressive rate hikes from the Fed, erased early-morning losses to rise 1%.

The gap between two-year and 10-year note yields, often seen as an indicator of an impending recession, further inverted. Rate-Sensitive Bank Stocks (.SPXBK) fell 2%.

At 9:46 a.m. ET, the Dow Jones Industrial Average (.DJI) down 606.02 points, or 1.87%, to 31,775.32, the S&P 500 (.SPX) down 94.40 points, or 2.30%, to 4,016.01, and the Nasdaq Composite (.IXIC) it fell 376.36 points, or 3.07%, to 11,890.06.

All three major indices had risen recently as investors took advantage of a sharp drop in share prices since mid-August triggered by concerns about rising inflation and the impact of tighter monetary policy to curb it.

eastman chemistry (EMN.N) fell 5% after the company forecast a negative third-quarter profit, citing slowing demand in the market for consumer durables, higher costs and the impact of a stronger dollar.

The CBOE Volatility Index (.VIX)also known as the Wall Street fear gauge, rose to 24.97 points.

Down issues outnumbered advances by 11.92 to 1 on the New York Stock Exchange and 6.29 to 1 on the Nasdaq.

The S&P index recorded no new 52-week highs and no new lows, while the Nasdaq posted 9 new highs and 62 new lows.

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Information from Devik Jain and Ankika Biswas in Bengaluru; Edited by Shounak Dasgupta

Our standards: The Thomson Reuters Trust Principles.

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