- Wall Street falls
- Inflation comes in hotter than expected
- Market prices out June rate cut
4:15pm: Inflation uptick dashes rate cut expectations
US stocks fell sharply to close out Wednesday’s trading session after a hotter-than-expected inflation report showed consumer prices rose more than expected in March.
The Dow Jones Industrial Average dropped around 1.1% to 38,462 points, while the S&P 500 and Nasdaq Composite also declined nearly 1% to 5,161 and 16,170 respectively.
Bond yields spiked, with the 10-year Treasury yield hitting its highest level since November. The unexpected acceleration in inflation could prompt the Federal Reserve to hold off on interest rate cuts this year, as over 80% of bets are now on the Fed keeping rates steady in June.
“Today’s market action isn’t panning out as many hoped,” IG’s Chris Beauchamp wrote in reaction to the CPI data.
“The CPI reading has upended the Fed’s narrative, and now a June move looks even less likely. US stocks have taken a hit, and the small caps are leading the way to the downside in what is becoming a very risk-off session.
“The Fed will struggle to convince markets that 2024 will still see three rate cuts, since inflation continues to be a very tricky beast to bring under control.”
1:38pm: Markets lower, Walmart only Dow Jones riser
Walmart was the only constituent of the Dow Jones Industrial Average index to sit in the green come Wednesday afternoon, as hot inflation data earlier on promoted a sell-off.
The index sat 485 points lower at 38,397 as a result, with the Nasdaq and S&P 500 also losing 165 and 58 points to fall to 16,141 and 5,150 respectively.
This was after inflation data earlier in the day showed prices rose by 3.5% in March, following 3.2% a month earlier and above analysts’ expectations of 3.4%.
“The Fed will struggle to convince markets that 2024 will still see three rate cuts since inflation continues to be a very tricky beast to bring under control,” IG analyst Chris Beauchamp commented.
In more positive news, energy equipment firm GE Vernova emerged as one of the few companies making substantial gains.
Shares in the General Electric spin-off jumped 3.8% throughout the day following its first upgrade by JPMorgan analysts on Tuesday since last week’s float.
General Electric was also up on the news, by 2%, while Nvidia climbed 1.7% after Bank of America analysts reiterated backing for the chipmaker despite a recent dip in the shares.
A downgrade by Truist Securities had Decker Outdoors Corp down 7.5% in the meantime, while Invesco Co, Paramount Global (NASDAQ:PARA) and Walgreens Boots Alliance Inc (NASDAQ:WBA, ETR:W8A) were also among hordes of companies facing hefty falls.
11.39am: Markets sink on inflation reading
The Dow Jones shed 462 points to sit at 38,421 by late morning after news broke that prices rose more than expected in March.
The Nasdaq and S&P 500 were hit too, falling 166 and 52 points respectively to 16,140 and 5,157 following the inflation reading.
The consumer price index (CPI) climbed by 3.5% last month, data from the Bureau of Labor Statistics showed on Wednesday morning, ahead of analysts expectations for 3.4%.
“[This] is exactly what stock bulls didn’t want to see,” eToro analyst Bret Kenwell commented.
“Month-over-month, year-over-year and Core CPI all came in hot, putting the Fed in a tough spot after they’ve recently reiterated an expectation for three rate cuts this year.”
Such expectations for an initial cut to base interest in June appear to have vanished on the reading, which comes after inflation climbed more than anticipated in January and February.
“Concerns are increasing that the recent bump in inflation is more sustainable and we’re seeing that reality reflected in the reaction to both stocks and bonds,” Kenwell added.
9.34am: US stocks open lower
Wall Street opened lower as all of the main indexes plunged on the back of hotter-than-expected inflation data.
The Dow Jones began trading 431 points lower at 38,452, while the S&P 500 dropped 59 points to 5,150.
The Nasdaq slipped 191 points to 16,119.
Stocks had been holding flat for much of the week in the build-up to the report, but now that it seems dates for interest rate cuts will likely be pushed back, they have made moves - albeit in the wrong direction.
Industrial companies such as Deere, Caterpillar and Eaton all dropped around 2% at the open, highlighting concerns that higher interest rates for longer could constrict the economy.
Another mover was Nvidia, which opened around 2% lower as analysts believe the AI chipmaker has entered correction territory, having dropped 10% from its March 25 all-time highs.
Alibaba jumped around 2% after it was revealed its co-founder Jack Ma had returned from the shadows to back the group's current restructuring plans.
9.09am: Markets price out June rate cut
US markets have now priced out a June rate cut, with swaps indicating just 50bps of rate cuts will take place this year.
Neil Wilson at Finalto said: "Treasury yields spiked sharply, and the dollar rallied whilst gold and stocks declined.
"The 2yr Treasury yield jumped around 20bps to 4.950% and the 10yr was up 13bps to 4.50% (indicating) markets pricing in the Fed staying higher for longer.
"The fact the move in the short-term rate is more than the longer suggests this is chiefly about what the market thinks the Fed will do next."
8.37am: US inflation rises more than expected
US inflation came in slightly higher than market consensus, prompting concerns that interest rate cuts may be delayed further.
Inflation in March sped up to 3.5% from 3.2% the month prior and came in hotter than forecasts of 3.4%.
Similarly, core inflation, which excludes food and energy prices, reached 3.8%, the same as in February, but up on estimates of 3.7%.
American stocks are readying to open marginally higher despite the data.
The Dow Jones is up around 61 points at 39,252 in premarket trading, while the S&P 500 lifted 8 points to 5,267.
Meanwhile, the Nasdaq is set to open around 28 points to 18,382.