Dow drops 1,200 points for worst day since June 2020 after searing inflation report
Stocks fell sharply on Tuesday following the release of a hotter-than-expected key August inflation report, hurting investor optimism about lower prices and a less aggressive Federal Reserve.
The Dow Jones Industrial Average slipped 1,276.37 points, or 3.94%, to close at 31,104.97. The S&P 500 fell 4.32% to 3,932.69 and the Nasdaq Composite fell 5.16% to end the day at 11,633.57.
Only five S&P 500 stocks ended in positive territory. Tech stocks were particularly hard hit, with Facebook’s parent company Meta slipping 9.4% and chip giant Nvidia losing 9.5%.
The decline erased almost all of the recent rally in stocks, bringing the S&P 500 back towards its Sept. 6 close at 3,908 and forcing some traders to backtrack to mid-June when the index fell below 3,700. .
“I think we might even go back and retest the June lows,” UBS head of ground operations Art Cashin said on CNBC’s “Squawk on the Street” on Tuesday.
“Granted, 3900 is so tempting, and you’re pulling back below the 50-day moving average here. It’s very much about technique. It’s not so much that the single number tipped the economy. It meant a lot of guys who made preliminary favorable bets got caught off base,” he said.
The August Consumer Price Index report showed a higher than expected reading for inflation. Headline inflation rose 0.1% month-over-month, even with lower gasoline prices. Core inflation rose 0.6% month-on-month. On an annual basis, inflation was 8.3%.
Economists polled by Dow Jones had expected headline inflation to fall 0.1%, with core inflation rising 0.3%.
The report is one of the last the Fed will see ahead of its September 20-21 meeting, when the central bank is expected to make its third straight interest rate hike of 0.75 percentage points to stem the tide. ‘inflation. August’s surprisingly high report could lead the Fed to continue its aggressive hikes longer than some investors expected.
The move comes after four consecutive positive sessions for US equities, which were partly bolstered by the belief among many investors that inflation had already peaked.
“The CPI report was an unequivocal negative for equity markets. The warmer than expected report means we will face continued pressure from Fed policy via rate hikes,” said Matt Peron , director of research at Janus Henderson Investors. “It also pushes back any ‘Fed pivot’ the markets were hoping for in the near term.”
The sell-off was particularly painful in high-growth areas of the market. Cloudflare fell more than 10%, while Unity Software fell around 13.4%. Shares of direct-to-consumer auto retailer Carvana fell 12.9%.
Read the coverage of the mercado de hoy en español here.