New inflation numbers released by the U.S. Bureau of Labor Statistics (BLS) on Tuesday caused the Dow to plummet over 1,000 points.
The Dow Jones Industrial Average sank 3.5%, the Nasdaq dropped 4.6% and all eleven sectors of the S&P 500 fell after the BLS Consumer Price Index (CPI) report showed that prices were up 0.1% since July and that year-over-year inflation decelerating more slowly than economists expected, CNBC and The Associated Press reported.
CPI report not pretty. Headline fine (0.1% CPI for Aug or a 1.4% annual rate in that month, with prices up 8.3% over the last year).
Problem is excluding volatile food and energy and was ugly (0.6% for Aug or a 7.0% annual rate).
Broad-based relief not coming. pic.twitter.com/WVODxYmrYm
— Jason Furman (@jasonfurman) September 13, 2022
“Today’s CPI reading is a stark reminder of the long road we have until inflation is back down to earth,” Mike Loewengart, the head of model portfolio construction for Morgan Stanley’s Global Investment Office, told CNBC. “Wishful expectations that we are on a downward trajectory and the Fed will lay off the gas may have been a bit premature.”
Prices rose 8.3% from Aug. 2021 to Aug. 2022, down slightly from the 8.5% year-over-year increase in July but still higher than the 8.1% economists projected, scaring traders and bringing fears that the U.S. Federal Reserve will soon raise interest rates again, according to CNBC and The New York Times. (RELATED: Biden Brags About ‘Progress’ On Inflation Despite Spike In Food Prices)
The CPI report also caused the S&P 500 to be trading 3.7% lower on Tuesday afternoon compared to the previous four days, and bond yields rose after their prices tumbled, the outlet reported.
“Right now, it’s not the journey that’s a worry so much as the destination,” the AP reported senior investment strategist at Allspring Global investments, Brian Jacobsen said. “If the Fed wants to hike and hold, the big question is at what level.”
Treasury yields increased by .13% to 3.704%, a key indication that the Fed will raise the interest rates by another 0.75% at its Sept. 20-21 Federal Open Market Committee meeting, CNBC reported.