Dow drops by nearly 500 points after a surprisingly bad inflation report
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Investors worry the hotter-than-expected inflation report will push back the Fed’s timeline for the rate cuts it has been hinting would come this year.
New York
CNN
—
US stocks fell sharply Wednesday morning after inflation data for March came in higher than expected.
The blue-chip Dow was lower by 462 points, or 1.2%. The S&P 500 lost 1% and the Nasdaq Composite fell by 1%.
US consumer prices picked up again last month, vaulting to a 3.5% increase for the 12 months ended in March, according to the latest Consumer Price Index data released Wednesday by the Bureau of Labor Statistics.
That’s up considerably from February’s 3.2% rate and marks the highest annual gain in the past six months.
Investors worry this will push back the Fed’s timeline for the rate cuts it has been hinting would come this year.
“Today’s crucial CPI print has likely sealed the fate for the June [Fed] meeting with a cut now very unlikely,” said Seema Shah, chief global strategist at Principal Asset Management, in a note Wednesday. “Even if inflation were to cool next month to a more comfortable reading, there is likely sufficient caution within the Fed now to mean that a July cut may also be a stretch, by which point the US election will begin to intrude with Fed decision making.”
Just over 20% of investors expect an interest rate cut at the Fed’s June meeting, according to the CME FedWatch tool. That’s down from 56% one day ago.
About 53% of investors also believe rates will remain unchanged at the July meeting. That rate has more than doubled since yesterday.
The 10-year Treasury yield, which serves as a standard for mortgage and loan rates, surged after the announcement, approaching 4.5%.
Wednesday’s market drop was broad as investors worried about what higher-for-longer interest rates could mean for the economy.
Shares of bank stocks fell. Bank of America was down 2.4%, Wells Fargo dropped 1.3%; and JPMorgan Chase, which reports first quarter earnings on Friday, was down about 1%.
Microsoft, Amazon and Apple were all hovering around 1% lower.
Investors are looking to the Fed’s March meeting minutes, due out at 2 pm ET Wednesday, for more clues about where central bank officials stand on rate cuts this year.
This is a developing story and will be updated.
