Topline
Stocks tumbled throughout the day Tuesday after last month’s inflation report logged a steeper-than-expected jump in consumer prices, as investors worry the Federal Reserve will keep raising interest rates to combat inflation.
Traders work during the opening bell at the New York Stock Exchange.
Key Facts
The Dow Jones Industrial Average was down 1276 points, or 3.94%, at the market close, while the S&P 500 fell 4.32% and the Nasdaq sank 5.2%, marking the worst day of 2022 for all three indexes.
The losses—which wiped out a large portion of recent stock gains—came after data released earlier by the Labor Department showed consumer prices rose by a steeper-than-expected 8.3% in the 12 months ending in August, fueled by increases in shelter, food and medical care prices.
The August inflation data showed price increases slowed for the second consecutive month, due largely to declines in gas prices, but still marked a 0.1% jump in overall prices since July after economists predicted a 0.1% drop.
Crucial Quote
“Markets were jolted by a nasty CPI print this morning and are responding in kind,” said Cliff Hodge, chief investment officer for Cornerstone Wealth. “Unfortunately for markets this print will reinforce the need for the Fed to remain aggressive and will likely keep a lid on risk assets over the foreseeable future.”
Key Background
Inflation reached a four-decade high of 8.5% in July and 9.1% in June, leading the Federal Reserve to hike interest rates even more to combat surging prices. Core inflation, which does not include volatile food and energy prices, increased 0.6% on a monthly basis in August, twice as much as economists predicted and double July’s 0.3% rise, though gas prices fell from record highs this summer. Fed officials have said in recent weeks the central bank will continue to raise interest rates until they see significant declines in inflation, a shift they have said will likely “take some time.” August’s inflation report is the last the Fed will see before a late September meeting where the central bank is expected to raise interest rates by 0.75 percentage points for the third time. The latest consumer price data could cause the central bank to continue hiking interest rates for even longer than some investors predicted.
Further Reading
Inflation Climbed 8.3% In August—Slowing For Second Straight Month As Gas Prices Plunged (Forbes)
Stock sell-off deepens, Dow drops 900 points after hot inflation report (CNBC)
Source: https://www.forbes.com/sites/madelinehalpert/2022/09/13/sp-500-faces-biggest-drop-this-year-as-inflation-remains-stubbornly-high/