Dow plunges 1,200 points for worst day since June 2020 after tepid inflation report

Stock markets fell sharply on Tuesday August Inflation Report It came in hotter than expected, with cooling prices and a less aggressive Federal Reserve hurting investor confidence.

The Dow Jones industrial average closed down 1,276.37 points, or 3.94%, at 31,104.97. The S&P 500 fell 4.32% to 3,932.69, while the Nasdaq Composite fell 5.16% to 11,633.57.

Just five stocks in the S&P 500 finished positive. Tech stocks were hit particularly hard, with Facebook-parent Meta down 9.4% and chip company Nvidia down 9.5%.

The decline erased all of the stock’s recent rally, dragging the S&P 500 toward its Sept. 6 high of 3,908 and prompting some traders to look back when the index fell below 3,700 in mid-June.

“I think we can go back and reconsider the June lows,” Art Cashin, director of UPS site operations, said Tuesday on CNBC’s “Squawk on the Street.”

“Certainly 3900 is very attractive, and you’re pulling back below the 50-day moving average here. It’s about the technical. It’s not so much that it’s a numbers economics reversal. It means a lot of guys who were betting on the preliminary advantage got caught,” he said.

The August Consumer Price Index report showed higher-than-expected inflation. Even as gas prices fell, headline inflation rose 0.1% for the month. Core inflation rose 0.6% month-on-month. On an annualized basis, inflation stood at 8.3%.

Economists polled by Dow Jones expected a 0.1% decline for overall inflation, with a 0.3% rise for core inflation.

It is one of the last reports the central bank will see ahead of its September 20-21 meeting, where the central bank is expected to deliver it. A third consecutive 0.75 percent interest rate hike To reduce inflation. The unexpectedly high August report could lead the Fed to continue its aggressive hikes longer than some investors expected.

The moves came after four positive sessions for U.S. stocks, bolstered in part by many investors’ belief that inflation has already peaked.

“The CPI report was an unequivocal negative for equity markets. The warmer-than-expected report means we will continue to get pressure from Fed policy through rate hikes,” said Matt Perron, director of research at Janus Henderson Investors. “This pushes back any ‘Fed Pivot’ that markets were hoping for in the near term.”

Sales were especially painful in high-growth areas of the market. Cloudflare fell more than 10%, while Unity Software fell about 13.4%. Shares of direct-to-consumer car retailer Carvana fell 12.9%.

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