Wall Street Plummets After Inflation Sparks Sell-off
Wall Street Reacts to Consumer Inflation Data
Wall Street’s main indexes tumbled on Tuesday due to a higher-than-expected consumer inflation reading, which pushed back market expectations of imminent interest rate cuts and drove U.S. Treasury yields higher. The S&P 500 posted its biggest one-day percentage drop in almost 11 months, following a Labor Department report that revealed U.S. consumer prices increased above forecasts in January, primarily due to a surge in the cost of shelter.
Impact on Equities and Market Expectations
The higher inflation has led equities to retreat mode, with market expectations for imminent interest rate cuts being pushed back. The inflationary CPI report has setback the Federal Reserve, with bets by traders for a rate reduction dropping to 36.1% for May, from about 58% before the data was released. Real estate, consumer discretionary, and utilities led losses among the 11 major S&P 500 sector indexes, with real estate falling to a low of over two months. The small-cap index also fell 4.3%, marking the biggest one-day drop since June 16, 2022.
Market Reaction and Stock Movements
The latest data comes on the heels of a modest revision to inflation in the last quarter of 2023, which left investors briefly relieved on the trajectory of inflation. The Cboe volatility index, a market fear gauge, hit its highest level since November. The S&P 500 lost 68.14 points, the Nasdaq Composite lost 282.64 points, and the Dow Jones Industrial Average fell 522.05 points, marking its biggest one-day percentage loss since March 22, 2023. JetBlue Airways soared 21.6% after activist investor Carl Icahn reported a 9.91% stake, while Arista Networks shares fell 5.5% after the cloud solutions provider forecast current-quarter adjusted gross margin below expectations.
Declining Issues and Market Trading
Declining issues outnumbered advancers by a 10-to-1 ratio on the NYSE and a 4.9-to-1 ratio on the Nasdaq. On U.S. exchanges, 12.9 billion shares changed hands compared with the 11.71 billion moving average for the last 20 sessions.
