The First Slice for Wednesday, September 14, 2022

The Dow Jones Industrial Average closed nearly 1,300 points lower Tuesday as technology stocks led the market to its worst day since June 11, 2020, following an unexpected uptick in August consumer-price inflation.

  • The Dow dropped -1276.00 or -3.94%
  • The S&P 500 shed -177.72 or -4.32%
  • The Nasdaq tumbled -632.83 or -5.16%

All 11 S&P 500 sectors finished in the red after the August consumer-price index, or CPI, rose 0.1% in August. Though the year-over-year rate slowed to 8.3% from 8.5% in July, economists had been looking for a monthly fall of 0.1% that would bring the year-over-year rate down to 8%. 

Meanwhile, the core rate, which strips out volatile food and energy prices, rose 0.6%, for a year-over-year rise of 6.3%, outstripping expectations for a 0.3% monthly rise and a 6% year-over-year pace.

That stoked fears that inflation may be stickier than economists had expected — which in turn might force the Federal Reserve to maintain its aggressive tightening of monetary policy for longer, or at least preclude a pivot back to lower interest rates. 

As stocks spiraled lower, losses accelerating in the final hour of trade, causing volatility to surge, with the Cboe Volatility Index, otherwise known as “the VIX,” rising more than 16% to 27.79.

The data is seen cementing expectations the Federal Reserve will boost the fed-funds rate by another outsize 75 basis points when it meets next week, with fed-funds futures penciling in roughly 40% odds of a 100 basis-point hike.

As stocks tumbled, the U.S. dollar strengthened as investors sought shelter in the safety of the greenback, while higher yields also made the buck more attractive. The ICE U.S. Dollar Index a gauge of the greenback’s strength compared with a basket of its main rivals, rose 1.4% to 109.88, close to the highest level in two decades.

 

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