US stock indices fell sharply on Tuesday, snapping a four-day gaining streak, after data showed monthly US consumer prices unexpectedly rose in August, bolstering bets that the Federal Reserve will raise interest rates by 75 basis points for the third consecutive time.
All 11 S&P sectors fell in early trading, led by a 3.3% drop in the communication services sector. The small-cap Russell 2000 index fell 2.5 percent.
The index of growth values S&P 500which houses interest rate-sensitive growth and technology stocks, fell 3% as Treasury yields rose.
Large-Cap Tech Stocks Apple y Microsoft fell by more than 2.3% each, while Tesla, Alphabet, Amazon y Meta Platforms They fell between 2.7% and 5.6%, and were the heaviest drags on the S&P 500 and the Nasdaq.
The Labor Department’s consumer price index (CPI) showed that the monthly CPI rose 0.1% in August from July, versus expectations for a 0.1% decline. In year-on-year terms, it rose 8.3%, more than the 8.1% economists had expected, according to a Reuters poll.
Excluding volatile food and energy components, the core CPI rose to 6.3% from 5.9% in July, putting further pressure on the Federal Reserve to continue its pace of rate hikes.
“The long-term view is pretty clear: Monetary policy is a very blunt instrument and anyone who thinks that inflation will start to come down just because the Federal Reserve has raised rates a couple of times is pretty ignorant of how monetary policy works. economy,” said Doug Fincher, portfolio manager at Ionic Capital Management.
Last week, policymakers reiterated their determination to keep raising rates until inflation, which is at a 40-year high and above the 2% target set by the Federal Reserve, subsides.
Money markets now see an 81% chance of a 75bp rate hike and a 19% chance of a 100bp rate hike at the September 20-21 Fed meeting, plus they expect rates to hit a maximum around 4.28% in March 2023.
The Dow Jones Industrial Average fell 872.79 points, or 2.70%, to 31,508.55 points, the S&P 500 lost 127.20 points, or 3.09%, to 3,983.21, and the Nasdaq Composite fell 482.53 points, or 3.93%, to 11,784.28 points. .
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