Wall St tumbles on new US inflation data

U.S. stock indices fell sharply, ending a four-day streak of wins, after data showed monthly U.S. consumer prices surged unexpectedly in August, strengthening bets on a third straight hike of 75 basis points from the Federal Reserve next week.

All 11 S&P sectors fell in early trading, led by a 3.3% decline in the communications services sector.

The Russell 2000 Small Cap Index fell 2.5%.

The S&P 500 Growth Stock Index, home to rate-sensitive growth and technology stocks, fell 3.0% as Treasury yields rose while its value counterpart lost 1.6%.

Tech mega-cap stocks Apple Inc and Microsoft Corp fell more than 2.3% each, while Tesla Inc, Alphabet Inc, Amazon.com Inc and Meta Platforms Inc fell between 2.7% and 5.6% % to weigh more on the S&P 500 and the Nasdaq.

The Department of Labor’s Consumer Price Index (CPI) report showed that the monthly CPI rose 0.1% in August from July, against a forecast of a 0.1% decline.

Year-on-year, it increased 8.3% while economists predicted an 8.1% increase, according to a Reuters poll.

Excluding volatile food and energy components, core CPI rose to 6.3% from 5.9% in July, putting further pressure on the Fed to continue its rate hike frenzy.

“The long-term view is pretty clear here, that monetary policy is a very straightforward tool and anyone who thought inflation would start to reverse just because the Fed increased the upside several times is pretty ignorant of how the economy works. . ”Said Doug Fincher, portfolio manager at Ionic Capital Management.

Last week, politicians stressed their determination to continue raising rates until there is a sustained decline in inflation, which is at a 40-year high and above the Fed’s 2.0% target. .

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

The US dollar, which rose sharply this year in part due to the Fed’s expectations of aggressive rate hikes, erased morning losses to climb 1.0%.

The spread between two-year and ten-year bond yields, often seen as an indicator of an impending recession, has further reversed.

Securities of rate sensitive banks fell by 2.0%.

In early trading, the Dow Jones Industrial Average fell 606.02 points, or 1.87%, to 31,775.32, the S&P 500 fell 94.40 points, or 2.30%, to 4,016, 01, and the Nasdaq Composite fell 376.36 points, or 3.07%. cent, at 11,890.06.

All three major indices rallied recently as investors benefited from a sharp drop in stock prices since mid-August, triggered by fears of soaring inflation and the impact of tighter monetary policy. . severe to restrain it.

Eastman Chemical fell 5.0% after the company forecast a meager profit for the third quarter, citing slower demand in the consumer durables market, higher costs and the impact of a stronger US dollar. loud.

The CBOE Volatility Index, also known as the Wall Street Fear Gauge, reached 24.97 points.

Falling issuance outperformed advances by 11.92 to 1 on the NYSE and 6.29 to 1 on the Nasdaq.

The S&P Index has not posted any new highs or new lows in 52 weeks, while the Nasdaq has recorded 9 new highs and 62 new lows.

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