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Dow tumbles as America’s prices keep rising

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What we covered here

  • Stocks tumbled after US consumer prices unexpectedly rose 0.1% in August.
  • Inflation remains stubbornly high, rising 8.3% annually – more than forecast. That’s fueling expectations of more historic rate hikes from the Federal Reserve.
  • Big rate hikes so far have done little to cool off inflation, and investors worry even higher rates could hurt the US economy.
  • Check the latest market moves here.
15 Posts

Stocks tumble in worst day since June 2020

US stocks plummeted in their worst day since June 11, 2020 after key August inflation data ticked upward, surprising investors. 

The market is worried that hotter-than-expected inflation will prompt the Federal Reserve to raise interest rates more aggressively, inflicting serious damage to the US economy in the process.

The Dow was down 1276 points, or 3.9%.

The S&P 500 fell 4.3%.

The Nasdaq Composite tumbled 5.2%. 

As stocks settle after the trading day, levels might still change slightly.

Down and down the stock market goes...

…where the selling ends, nobody knows. The Dow was down 1,300 points, or 4%, with minutes to go before the closing bell mercifully rings on Wall Street. The S&P 500 and Nasdaq plummeted 4.3% and 5.2% respectively. The end of the trading day will temporarily stop the selling. But investors have another inflation report to (fear? dread? seems unlikely that anyone is looking forward to it) on Wednesday.

The US government will release figures for the producer price index, which measures prices at the wholesale level…as opposed to today’s consumer price index report. Economists are anticipating more inflationary numbers.

The forecast is for a year-over-year increase of 8.8% for overall producer prices and 7.1% over the past 12 months for core PPI, which excludes food and energy costs.

Dow plunges more than 1,000 points

Investors are incredibly anxious about inflation, which refuses to go away. The Dow plummeted more than 1,050 points, or 3.3%, in late afternoon trading Tuesday. The S&P 500 and Nasdaq fared even worse, tumbling 3.6% and 4.5% respectively.

It was a broad-based slide, with all eleven sectors of the market heading lower. Tech stocks, retailers and banks were among the biggest losers. Those three groups stand to get hit the hardest if the Federal Reserve raises interest rates even more aggressively to try and get inflation under control.

Wall Street’s big fear is that higher rates will eventually lead to an economic slowdown or even a recession.

Stocks had been on a four-day winning streak prior to Tuesday’s plunge. One strategist suggested that there could be more market pain ahead. Traders may have made the mistake of assuming that inflation would soon no longer be a major economic problem.

“Investors clearly had reached a level of complacency with the 5% rally over the previous week. The reaction is severe but simply brings the S&P 500 Index back to the level from last Wednesday,” said Mark Hackett, chief of investment research with Nationwide, in a report.

Fear has returned to Wall Street

Halloween is still more than a month away. But investors are acting like they’ve seen a ghost.

The CNN Business Fear & Greed Index, which measures seven gauges of market sentiment, is once again showing signs of Fear on Tuesday as the broader market plunged. The VIX, a volatility index that is one of the seven components of the Fear & Greed Index, shot up nearly 8%.

The Fear & Greed index was in Fear mode a week ago as well but it had recently moved back into Neutral territory following a 4-day winning streak for stocks.

That streak is coming to a spectacular end thanks to the hotter than hoped for consumer price index report, as investors worry that the Federal Reserve is going to raise rates even more aggressively next week to fight persistent inflationary trends.

Wall Street’s mood has largely tracked the rapidly changing expectations regarding inflation and rate hikes. Just a month ago, before Fed chair Jerome Powell gave a speech that suggested more big rate increases were coming, the Fear & Greed Index was indicating levels of Greed, a sign of complacency.

Nowhere to hide as stocks swoon across the board

The stock market sell-off following Tuesday’s inflation report is turning into a rout.

The Dow plummeted nearly 900 points in late morning trading…and all 30 Dow components were in the red. Nine Dow stocks, including tech giants Intel (INTC), Microsoft (MSFT), Apple (AAPL) and Salesforce (CRM), were down more than 4% each. The tech sector was hit particularly hard Tuesday, as investors ratcheted up their bets for a historically large interest rate hike by the Federal Reserve next week.

The Nasdaq fell nearly 4%. Higher rates are particularly bad news for growth stocks. Only one stock in the tech-heavy Nasdaq 100 index was higher Tuesday…and not by much. China’s Netease (NTES) was barely above breakeven levels.

The news wasn’t much better for investors in the broader market. The S&P 500 was down more than 3% and just four stocks in the blue chip index were in positive territory. Agriculture company Corteva (CTVA) was the S&P 500 leader, gaining 2% following news of a stock buyback. Fertilizer stocks CF Industries (CF) and Mosaic (MOS) and chemicals company Albemarle (ALB) were higher too.

Twitter (TWTR), which is in the midst of Elon Musk takeover turmoil and a high profile whistleblower hearing in Washington was, curiously, holding up much better than the rest of the market, too. Its shares were flat.

Dow falls 900 points

The Dow has tumbled 900 points as Wall Street waves the white flag on inflation.

Investors are concerned that the Federal Reserve’s response to Tuesday’s report could hurt the US economy – possibly sending it into a recession.

The US Consumer Price Index Tuesday showed prices in August rose a bit. Although annual inflation fell compared to July, it didn’t fall as much as economists expected. That could give the Fed license to hike interest rates even faster and higher than forecast.

The S&P 500 sank 3.2%, and the Nasdaq was 4.1% lower.

Tuesday’s losses wiped out a week’s worth of gains on Wall Street.

Dow tumbles more than 850 points

Stock declines have accelerated, with the Dow down 850 points.

The S&P 500 fell 3% and the Nasdaq was down 3.9%, wiping out last week’s gains.

The market has grown increasingly nervous that the Fed will raise rates faster and higher than expected to get inflation under control.

Food price spike is biggest since Sony debuted the Walkman

Falling energy prices may be good news, but less pain at the pump isn’t helping consumers all that much. There’s still sticker shock at the supermarket.

The US government said in Tuesday’s August consumer price index report that overall food prices soared 11.4% over the past 12 months. That spike is the biggest increase since May 1979, while food-at-home costs had the largest year-over-year jump since March 1979, skyrocketing 13.5%.

That prompted Glenmede chief investment officer of private wealth Jason Pride to note in a report that these are the most dramatic annual price increases for food since Sony released the Walkman portable cassette player.

Actually, the Walkman didn’t technically debut until July 1, 1979, but we figure this is close enough. Here’s what people might have been listening to on those brand new devices: The number one song on the Billboard charts was the disco classic “Ring My Bell” by Anita Ward. The top album? Supertramp’s “Breakfast in America.”

Sadly, cooking that meal is a lot more expensive in 2022, but at least you can “take the long way home” from the grocery store now that gas prices have dropped.

The Dow is now down more than 700 points

The situation on Wall Street was ugly midmorning Tuesday, as investors grew increasingly nervous about the prospect of even higher rate hikes that could last for a longer period of time.

Inflation simply won’t go away. Economists expected prices would fall very slightly in August as gas prices have dropped for 91 straight days. Instead, prices rose, giving investors a collective heart attack over the Fed’s plans to curb inflation.

Already, the Fed has raised rates by a historic half point and then twice by three quarters of a point. Now a full point is on the table for this month (albeit unlikely), and the market fears the Fed may have to keep raising rates by historic amounts until it slows price gains – with hiring, the stock market and the economy as collateral damage.

The Dow fell 700 points, or 2.2%.

The S&P 500 was down 2.5%

The Nasdaq was 3.3% lower.

US stocks fall as inflation gauge comes in hot

US stocks opened lower on Tuesday morning following key inflation data that showed elevated prices remain persistent.

The August Consumer Price Index report, released Tuesday morning, came in hot with a higher-than-expected inflation reading. This is one of the last bits of data the Federal Reserve will see before its next policy meeting. The US central bank is widely expected to announce a third consecutive 0.75 percentage rate hike to ease prices.

Rate hikes haven’t yet proven effective at combatting inflation, worrying investors that the Fed will continue its pace of historic hikes, inflicting serious damage to the US economy in the process.

The Dow fell by 555 points, or 1.7%, on Tuesday morning.

The S&P 500 was down 2%.

The Nasdaq Composite was 2.7% lower.

Market now bracing for historically large rate hike

The Federal Reserve has never raised interest rates by a full percentage point at a single meeting — going back to at least 1990, when the Fed began publishing data on meeting by meeting interest rate decisions. But that may change later this month following another hot inflation report.

Consumer prices unexpectedly rose slightly in August from July and were up 8.3% over the past 12 months, a bigger jump than expected. As such, futures that track potential interest rate moves are now pricing in roughly 20% odds of a 100 basis point hike at the Fed’s September 21 meeting.

Of course, this means that the market still largely expects another three-quarters of a point increase, or 75 basis points. That would be the Fed’s third straight hike of that size, following similarly supersized increases in June and July.

But prior to the Consumer Price Index report Tuesday, investors were expecting a nearly 9% chance of a mere half-point increase. The hope was that inflation pressures would begin to cool more rapidly, making the need for more large rate hikes less necessary.

So much for that.

Stock futures tumble as prices keep rising

Investors do not like what they’re seeing this morning, after a key inflation report showed prices continued to rise even as gas prices have tumbled for three straight months.

That means, despite historic, economy-damaging rate hikes from the Federal Reserve, the US central bank still does not have control of inflation. Suddenly, expectations have shifted from a wind-down in rate hikes to a ramp-up – perhaps with the Fed raising rates by a full percentage point later this month. That hasn’t happened in the Fed’s modern era.

Dow futures tumbled 400 points, or 1.4%.

S&P 500 futures fell 1.8%.

Nasdaq futures were 2.4% lower.

The price of basically everything that isn't gas is still rising

Core CPI, which strips out the more volatile categories like food and gasoline, measured 6.3% in August, up from 6.2% in July.

Still, inflation remains painfully high for many Americans, especially those with little wiggle room in their monthly budgets. Annual price gains are a far cry from where they were 18 months ago and from the Federal Reserve’s target inflation rate of 2%.

“This is a fight we cannot, and will not, walk away from,” Fed Governor Christopher Waller said last week, underscoring the central bank’s laser focus on hitting its 2% goal.

The Fed has been tightening its monetary policy in recent months to help rein in the highest inflation in four decades, implementing back-to-back, super-sized rate hikes of 75 basis points.

Tuesday’s report — especially core CPI — will be scrutinized by the Fed ahead of its policymaking meeting next week.

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US annual inflation eased last month but remains stubbornly high

US inflation cooled off in August for the second-straight month but remained stubbornly high, according to data from the Bureau of Labor Statistics released Tuesday.

The Consumer Price Index, which measures a basket of consumer goods and services, showed prices were up 8.3% year on year, a slowdown from the 8.5% gain in July and the 9.1% spike in June. The last time the headline CPI rate declined in consecutive months was the first part of 2020.

On a monthly basis, consumer prices rose 0.1% from July.

The slower pace of annual price hikes comes alongside a significant drop in gas prices, which have come down from record highs set in June.

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So about that 'deflation' talk...

Two big names on Wall Street have sounded alarm about deflation recently, arguments that don’t appear to be holding up after Tuesday’s inflation report. 

Tesla CEO Elon Musk recently tweeted that “a major Fed rate hike risks deflation.”

Musk’s tweet came after Ark Invest CEO Cathie Wood also warned about deflation on Wednesday. “The Fed is basing monetary policy decisions on lagging indicators: employment and core inflation,” she said.

Falling prices can indicate weak demand, and consumer spending is a big portion of the economy. Markets are skittish that the Fed’s actions — which take a while to feed through the system — could overshoot, sending the US economy into a prolonged and deep recession.

Deflation can prompt the opposite of what we’ve seen recently — a downward spiral in jobs and wages as companies cut back production and lay off staff.

But that doesn’t seem to be happening yet for anything except gas prices. We can breathe a sigh of relief … on that front.

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