Wall St ends sharply lower as hot inflation sparks sell-off
Reuters
Published Feb 13, 2024 06:20AM ET
Updated Feb 13, 2024 07:00PM ET
By Johann M Cherian, Ankika Biswas and Carolina Mandl
(Reuters) -Wall Street's main indexes tumbled on Tuesday after a higher-than-expected consumer inflation reading pushed back market expectations of imminent interest rate cuts, driving U.S. Treasury yields higher.
The Dow Jones Industrial Average posted its biggest one-day percentage drop in nearly 11 months, after a Labor Department report showed U.S. consumer prices increased above forecasts in January amid a surge in the cost of shelter.
"Equities are in retreat mode following a still inflationary CPI report," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "The higher for longer inflation is a setback for the Federal Reserve."
Markets have rallied this year on bets that the Fed would start trimming rates in May. The S&P 500 closed above 5,000 for the first time on Friday. The Dow is also trading near a record-high level, and on Monday the Nasdaq briefly surpassed its record closing high from November 2021.
After the release of the inflation data, bets by traders for a rate reduction in May of at least 25 basis points dropped to 36.1%, from about 58% before the data, while expectations for June stood at 74.3%, the CME FedWatch tool showed.
Rate-sensitive megacaps like Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN) and Meta Platforms (NASDAQ:META) fell between 1.6% and 2.2%, as yields on U.S. Treasury notes across the board spiked to two-month highs. [US/]
Most chip stocks such as Micron Technology (NASDAQ:MU), Qualcomm (NASDAQ:QCOM) and Broadcom (NASDAQ:AVGO) also dropped, sending the Philadelphia SE Semiconductor index down 2%.
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 more than two months.
The small-cap Russell 2000 index also fell 4.3%, the biggest one-day drop since June 16, 2022.
"Many Federal Reserve governors have come out in the last couple of weeks and given various indications that the cuts expected by the market in the first half of the year may have been premature. Now the CPI data are certainly reaffirming that picture," said Bob Elliott, chief investment officer at Unlimited Funds.
The latest data comes on the heels of a modest revision to inflation in the last quarter of 2023 that 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, or 1.37%, to end at 4,953.70 points, while the Nasdaq Composite lost 282.64 points, or 1.79%, to 15,659.91. The Dow Jones Industrial Average fell 522.05 points, or 1.36%, to 38,275.33.
Get The News You Want
It marked Dow's biggest one-day percentage loss since March 22, 2023.
Among top movers, JetBlue Airways (NASDAQ:JBLU) soared 21.6% after activist investor Carl Icahn reported a 9.91% stake, adding that the carrier's stock is "undervalued."
Arista Networks (NYSE:ANET) shares fell 5.5% after the cloud solutions provider forecast current-quarter adjusted gross margin below expectations, while Marriott International (NASDAQ:MAR) lost ground after the hotel operator forecast annual profit below Street expectations.
Shares of software firm Cadence Design (NASDAQ:CDNS) Systems dropped 4% following a bleak quarterly sales forecast, while toymaker Hasbro (NASDAQ:HAS) lost after a steeper-than-expected drop in holiday-quarter sales and profit.
Tripadvisor stock jumped 13.8% as the online travel agency formed a special committee to evaluate deal proposals.
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.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.