Stocks slump, post worst day of year after worrying inflation data : NPR
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All three major indexes plunged on Tuesday after worse-than-expected inflation data raised fears the Federal Reserve will continue to raise interest rates aggressively to keep prices in check.
The Dow Jones Industrial Average fell nearly 1,300 points, while the broad S&P 500 fell more than 4%.
It was the worst day since June 2020 for both indices.
Nasdaq suffered even bigger losses, falling more than 5% on its worst day since March 2020.
The latest consumer price index showed prices rose 8.3% in August from a year earlier. While that was less than in June, inflation did not slow as much as Wall Street had expected.
Inflation data caught investors off guard. They kept hoping for a more correction in August.
But the latest CPI data shows many things continue to rise, including essentials like food, electricity and rent.
Markets now expect the Fed will need to raise rates by three-quarters of a percentage point at its meeting next week, its third consecutive rate hike of that size.
Some traders are even bracing for the Fed to raise rates by one percentage point.
“Overall, inflation remains unacceptably high for policymakers,” said Rubeela Farooqi, chief US economist at High Frequency Economics.
“Along with the still-strong labor market, the data marks the deal for another strong 75 basis point rate hike next week,” she wrote in a note after the data was released.