The Dow Jones Industrial Average closed nearly 1,300 points lower on Tuesday as technology shares led the market to its worst day since June 11, 2020, after an unexpected spike in consumer price inflation in August.
Dow Jones Industrial Average DJIA,
It fell 1276.37 points, or 3.9%, to close at 31,104.97 points.
S&P 500 SPX Index,
It fell 177.72 points by 4.3% and closed at 3932.69 points.
It fell 632.84 points, or 5.2%, to close at 11633.57 points.
This was the largest daily percentage drop for all three indices since June 11, 2020, according to market data from Dow Jones.
ETFs that track popular indices, including the SPDR S&P 500 ETF Trust SPY,
and the SPDR Dow Jones Industrial Average Trust ETF DIA,
Decreased by 4% or more. Technically focused Nasdaq-100 NDX,
and Invesco QQQ Trust ETF QQQ,
Both fell 5.5%.
What drives the markets
All eleven S&P 500 sectors finished in the red after the August Consumer Price Index, or CPI, It rose 0.1% in August. Although the annual rate slowed to 8.3% from 8.5% in July, economists were looking for a 0.1% monthly decline that would bring the annual rate down to 8%.
Meanwhile, the core rate, which excludes volatile food and energy prices, rose 0.6%, an annual increase of 6.3%, beating expectations for a rise of 0.3% monthly and 6% year-on-year.
That raised concerns that inflation could be more steady than economists had expected – which in turn could force the Federal Reserve to maintain its tight monetary policy for longer, or at least prevent a return to interest rate cuts.
As stocks fell, losses accelerated in the last hour of trading, causing volatility to rise, with the Cboe Volatility Index, also known as “VIX,” VIX,
It rose more than 16% to 27.79.
Markets have been shaken by a poor CPI print this morning and are responding in kind,” said Cliff Hodge, chief investment officer at Cornerstone Wealth in Charlotte, North Carolina. “Errors in both the title and substance are disappointing as this bout of inflation is only ‘transient.’ Unfortunately for the markets, this reading will reinforce the need for the Fed to remain strong and likely to keep a lid on risk assets for the foreseeable future.”
The data is seen to bolster expectations that the Federal Reserve will boost the federal funds rate by another 75 basis points when it meets next week, with Fed fund futures expected nearly 40% of a 100 basis point rise.
Yield on policy-sensitive two-year bonds BX: TMUBMUSD02Y It rose 18.3 basis points to 3.754%, touching its highest level in nearly 15 years, and also inverting the yield curve – a phenomenon seen as a reliable recession indicator.
“Today’s inflation data is not the data the Fed wanted to see the week before.” “Making an important policy rate decision,” said Charlie Ripley, chief investment analyst at Allianz Investment Management in Minneapolis. “With core inflation rising twice as fast as economists expected and annual inflation excluding food and energy, rising to 6.3%, it’s clear that the Fed is off for them.”
Overall, inflation readings remain unacceptably high for policy makers. Combined with the still-strong labor market, the data sealed the deal with a 75 basis point rate hike next week.”
With stocks falling, the US dollar strengthened as investors sought a safe haven for the US currency, while higher yields made the US dollar more attractive. ICE DXY US Dollar Index,
A measure of the dollar’s strength relative to its basket of major rivals, it rose 1.4% to 109.88, close to a two-decade high.
Companies in focus
Shares of Megacap in technology and strong consumer discretionary firms helped drive the selloff on Tuesday. Apple company
And the Tesla Corporation
Everyone is down 4% or more With Meta down 9.4% and Amazon down 7.1%.
Allegedly unprofitable technical names such as those in ARK Innovation Exchange Traded Fund
It was among the worst performing on Tuesday. The ARK ETF was down 6.8%.
Reported late on Monday minimum More-than-expected earnings came in late Monday and executives’ earnings expectations were also lower than analysts had expected, as a stronger dollar took its toll. Shares closed down 1.4%.
Peloton Interactive Inc.
He said late on Monday that he has Resignations accepted From co-founders John Foley and Hisao Koshi, the latest leadership change hits the troubled interactive fitness company. Shares fell 10.3%.
Online clothing rental platform Hire Runway Inc.
announced on Monday Plans to cut company employees After the fluctuation of demand in the summer season. Shares fell 38.7%.
Only a handful of S&P 500 companies ended Tuesday in the green, including Twitter Inc. And four stock items focused on fertilizers: Albermarle Corp.
+ 0.38%And the
+ 0.87%And the
CF Industries Holdings Inc.
And the Mosaic Company
All 11 S&P 500 sectors were trading in the red.
– Steve Goldstein contributed to this article.
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