Dow Sheds 800 Points & Stocks Turn Red After Hot Inflation Report
The inflation report for August was even more, worse than the forecast and thus dented the investor's optimism. This directly means that we are not going to see any slowdown in the fast-paced rate hikes, and the high prices are also not coming down.
This bleak picture of the US economy pushed the Dow Jones index to shed 800 points (-2.6%). Similarly, the S&P 500 index was also down 3%, along with the NASDAQ, which lost 3.9%. Overall, around 490 stocks which are present in the S&P 500 were red, with Meta losing 7.9% and Ceasars Entertainment registering a loss of 7.3%.
The inflation report was so potent that it ended up removing a lot of positive sentiment built by the stocks.
Markets Are Bothered By Inflation Report
The speed of the sell-off was really fast, even more than the recent bullish moves. However, that's usually normal as selling tends to be faster than buying. For now, the market has recovered a little bit from its recent lows, but that's not to say that things are back to normal. Although the markets are not in panic mode, they are bothered, and that's a fact.
The CPI report from August revealed that the reading for inflation was higher than expected. The headline inflation for the month over a month saw an increase of 0.1% despite a drop in gas prices. As for the yearly basis, the inflation reading was at 8.3%, which is similar to what we see in the UK and Germany.
Analysts expected that inflation would drop by 0.1% (on a yearly basis), and for core inflation, an increase of 0.3% was expected. Unfortunately, both of these targets were missed as the inflation ended up increasing!
At the next Fed meeting, the authorities will also look at this recent report. As a result, the chances of another interest rate hike have also increased since that's one of the tools used by the Fed for countering inflation.
We all know that inflation will lead to higher interest rates, and higher rates are not a good thing for the stock market!