Wall Street slumps as inflation figures raise bets of big rate hikes

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

Sep 13 (Reuters) – US stock indexes fell sharply on Tuesday, breaking a four-day winning streak, after data showed monthly U.S. consumer prices unexpectedly rose in August, the third straight 75-basis-down from Federal Point rate hikes strengthened the stakes. Reserve next week.

All 11 S&P sectors declined in early trade as the communications services sector declined 3.3% (.SPLRCL), Small Cap Russell 2000 Index (.RUT) dropped 2.5%.

S&P 500 Growth Stock Index (.igx)In which rate-sensitive technology and growth stocks fell 3% as Treasury yields rose, while its value counterpart (.ivx) Lost 1.6%.

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Mega-Cap Technology Stock Apple Inc. (AAPL.O) and Microsoft Corp. (msft.o) each fell more than 2.3%, while Tesla Inc. (TSLA.o)Alphabet Inc. (GOOGLE.O)Amazon.com Inc. (AMZNO) and Meta Platforms Inc. (meta.o) It dropped between 2.7% and 5.6% to weigh heavily on the S&P 500 and the Nasdaq.

The Labor Department’s Consumer Price Index (CPI) report showed the monthly CPI rose 0.1% in July to August, while a 0.1% decline is expected. It rose 8.3% on a year-on-year basis, according to a Reuters poll, while economists were forecasting a growth of 8.1%. read more

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

“The long-term view is very clear here, that monetary policy is a very blunt instrument and anyone who thinks that inflation will start to slide just because the Fed has hiked twice is very ignorant of the way economics works. It is,” said Doug Fincher. Portfolio Manager at Ionic Capital Management.

Policymakers last week stressed their determination to continue raising rates until a sustained decline in inflation, which is at a 40-year high and well above the Fed’s target of 2%.

Money markets now see an 81% chance of a 75-basis-point increase in rates and a 19% chance of a 100 bps hike by the Fed at its September 20-21 meeting, compared to a rate peaking of around 4.28% in March. hopefully. 2023.

The dollar, which has risen sharply this year on expectations of aggressive rate hikes by the Fed, erased the morning’s losses to climb 1%.

The gap between yields on two- and 10-year notes, often seen as an indicator of an impending recession, turns further upside down. rate sensitive bank stocks (.spxbk) dropped 2%.

9:46 am ET, Dow Jones Industrial Average (.dji) 31,775.32, down 606.02 points, or 1.87%, the S&P 500 . was on (.spx) The Nasdaq Composite was down 94.40 points, or 2.30%, at 4,016.01 (.IXIC) It was down 376.36 points or 3.07% at 11,890.06.

The three major indices had rallied recently as investors took advantage of the sharp fall in stock prices since mid-August, triggered by concerns over rising inflation and the impact of tighter monetary policy to contain it.

Eastman Chemical (emn.n) Citing a hit from lackluster demand in the consumer durables market, higher costs and a stronger dollar, the company forecast a fall in third-quarter profits, which fell 5%.

CBOE Volatility Index (.VIX)Also known as Wall Street’s fear gauge, it rose to 24.97 points.

The declines to an 11.92-to-1 ratio on the NYSE and 6.29-to-1 ratio on the Nasdaq outweighed the advances.

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

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Reporting by Devik Jain and Ankika Biswas in Bengaluru; Editing by Shaunak Dasgupta

Our Standards: Thomson Reuters Trust Principals.

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