The Dow Jones Industrial Average fell for the day after a Labor Department report showed U.S. consumer prices rose more than expected in January on rising shelter costs. This was the highest percentage in about 11 months.
„Stocks are in recession mode with the CPI report still trending toward inflation,“ said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. “A prolonged period of higher inflation would be a setback for the Federal Reserve.”
This year, markets have rallied from expectations that the Fed will start cutting interest rates in May. On Friday, the S&P 500 index closed above 5,000 for the first time. The Dow Jones Industrial Average is also hovering near all-time highs, and the Nasdaq briefly surpassed its highest closing price since November 2021 on Monday.
Traders' expectations for a rate cut of at least 25 basis points in May after the release of the inflation data fell to 36.1% from about 58% before the data was released, compared to 36.1% in June, according to the CME FedWatch tool. It was shown that the prediction was 74.3%. .
Interest-sensitive large-cap stocks such as Microsoft, Alphabet, Amazon.com and Metaplatform fell 1.6% to 2.2% as U.S. Treasury yields rose across the board to their highest levels in two months. Most semiconductor stocks, including Micron Technology, Qualcomm and Broadcom, also fell, with the Philadelphia SE Semiconductor Index down 2%. Among the 11 major S&P 500 sector indexes, real estate, consumer staples and utilities led the decline, with real estate falling to its lowest point in more than two months.
The small-cap Russell 2000 index also fell 4.3%, the largest single-day decline since June 16, 2022.
„A number of Fed officials have spoken out in recent weeks, giving various indications that the rate cuts that markets were expecting in the first half of this year may have been premature,“ Bob said. We are reconfirming the situation.“ Elliott, chief investment officer at Unlimited Funds.
The latest data comes after a small correction in inflation for the final quarter of 2023, giving investors temporary relief on the inflation trajectory.
The CBOE Volatility Index, which measures market anxiety, hit its highest level since November.
The S&P 500 Index fell 68.14 points (1.37%) to end at 4,953.70 points, and the Nasdaq Composite Index fell 282.64 points (1.79%) to 15,659.91 points. The Dow Jones Industrial Average fell 522.05 points, or 1.36%, to $38,275.33.
This was the largest single-day decline in the Dow since March 22, 2023.
Among the top performers, JetBlue Airways soared 21.6%. This comes after activist investor Carl Icahn, who owns a 9.91% stake in the company, said the stock was „undervalued.“
Arista Networks shares fell 5.5% after the cloud solutions provider said it expected adjusted gross margin for the current quarter to be lower than expected, while Marriott International said the hotel operator's full-year profit forecast missed street expectations. It stalled as a result of the drop.
Shares of software company Cadence Design Systems fell 4% after a bleak quarterly sales outlook, and toy maker Hasbro fell after a sharper-than-expected drop in holiday quarter sales and profits. .
TripAdvisor shares rose 13.8% after the online travel agency formed a special committee to evaluate the proposed transaction.
Declining issues outnumbered advancing issues by a 10-to-1 ratio on the NYSE and 4.9-to-1 on the Nasdaq.
On US exchanges, 12.9 billion shares were traded, compared to the moving average of 11.71 billion shares over the past 20 sessions.
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