Wall Street ends sharply lower as hot inflation sparks sell-off
Wall Street's main indexes tumbled on Tuesday after a higher-than-expected consumer inflation reading pushed back market expectations of imminent interest rate cuts, driving U.S. Treasury yields higher.
The Dow Jones Industrial Average posted its biggest one-day percentage drop in nearly 11 months, after a Labor Department report showed U.S. consumer prices increased above forecasts in January amid a surge in the cost of shelter.
«Equities are in retreat mode following a still inflationary CPI report,» said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. «The higher for longer inflation is a setback for the Federal Reserve.»
Markets have rallied this year on bets that the Fed would start trimming rates in May. The S&P 500 closed above 5,000 for the first time on Friday. The Dow is also trading near a record-high level, and on Monday the Nasdaq briefly surpassed its record closing high from November 2021.
After the release of the inflation data, bets by traders for a rate reduction in May of at least 25 basis points dropped to 36.1%, from about 58% before the data, while expectations for June stood at 74.3%, the CME FedWatch tool showed.
Rate-sensitive megacaps like Microsoft, Alphabet, Amazon.com and Meta Platforms fell between 1.6% and 2.2%, as yields on U.S. Treasury notes across the board spiked to two-month highs.
Most chip stocks such as Micron Technology, Qualcomm and Broadcom also dropped, sending the Philadelphia SE Semiconductor index down 2%.
Real estate, consumer
