U.S. stocks tumbled on Wednesday as new inflation data shook trader expectations for a larger rate cut from the Federal Reserve next week. According to a CNBC report published earlier today, the S&P 500 dropped 1.1%, while the Dow Jones Industrial Average fell by 517 points, or 1.3%. The Nasdaq Composite also shed 0.6%. The sell-off came after the core consumer price index (CPI) rose slightly more than expected, dampening hopes for a half-point rate cut from the central bank.
As CNBC noted, stocks such as UnitedHealth Group, Travelers, and Amgen dragged the Dow lower, while bank stocks also took a hit. JPMorgan Chase shares dropped nearly 1% after offering a cautious outlook on net interest income for 2025 during Tuesday’s commentary. The broader market sell-off impacted multiple sectors, with financials being particularly affected. CNBC reported that the S&P 500 financials sector lost more than 2%, putting it on track for its biggest one-day drop since early August.
CNBC highlighted that traders are now pricing in an 85% chance of a 25 basis point rate cut at the Federal Reserve’s 17-18 September meeting, according to CME Group’s FedWatch tool. Although the overall CPI hit its lowest annualized level since February 2021, the core reading, which excludes food and energy, came in slightly above forecasts, dampening hopes for a larger rate cut.
According to CNBC, Steve Sosnick, chief strategist at Interactive Brokers, described the core CPI reading as a “big splash of cold water” on market sentiment. Sosnick noted that while the CPI data was not terrible on its own, the higher-than-expected core reading dashed hopes for a 50 basis-point rate cut.
Additionally, CNBC pointed out that September has historically been a challenging month for the stock market, with the S&P 500 averaging losses of over 1% during the past decade. The index has also posted losses in September for the past four consecutive years, adding to the current seasonal headwinds investors are facing.
The CNBC report went on to say that financial stocks were particularly hard-hit in Wednesday’s sell-off, with Discover Financial, Capital One, and Regions Financial leading the sector’s decline. Major players like Bank of America, JPMorgan Chase, and Goldman Sachs also closed lower, reflecting broader concerns in the financial sector amid market volatility.
According to the press release issued at 8:30 a.m. ET on September 11 by the U.S. Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U) rose by 0.2% in August 2024, matching the increase seen in July. Over the past year, the all-items index increased by 2.5%, marking the smallest annual increase since February 2021. The shelter index was the primary contributor to the overall rise, increasing by 0.5% in August. Meanwhile, the food index saw a slight rise of 0.1%, and the energy index fell by 0.8% during the same period.
The core CPI, which excludes volatile food and energy prices, increased by 0.3% in August, following a 0.2% rise in July. Key contributors to the core increase were higher prices for shelter, airline fares, motor vehicle insurance, education, and apparel. Offsetting some of these gains were declines in used cars and trucks, household furnishings, medical care, and recreation.
Over the past 12 months, core CPI rose 3.2%, while the energy index dropped 4.0% and the food index saw a 2.1% increase.
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