US inflation blow: the main Wall Street equity indices capitulated, attacked by strong sell offs. The S&P 500 Index ended its worst session since June 11, 2020, weighed down in particular by stocks such as Meta, Nvidia and AMD.
The worst stocks in the Dow Jones were Boeing, Home Depot and Intel.
The bloodbath occurred after four consecutive sessions of increases for the US stock market.
The outcome of the strong disposals is the following: the Dow Jones slipped by almost -1,300 points (-1,278.37 points, a loss of 3.94% at a percentage level), to 31,104.95. The S&P 500 fell 177.74 points (-4.32%) to 3,932.68 while the Nasdaq tumbled 632.83 points (or -5.16%), to 11,633.58 points.
Nothing to do: in the United States, inflation continues to run, or if it weakens, it remains well above analysts’ expectations, despite the aggressive rate hikes that Jerome Powell’s Fed is stubbornly pursuing.
In August, US inflation as measured by the consumer price index slowed to an annual rate of 8.3%, from + 8.5% in July. However, the weakening of the CPI index occurred at a slower pace than expected by the consensus of analysts, who had forecast an increase of + 8.1%.
On a monthly basis, headline inflation also rose by 0.1%, strengthening with respect to the unchanged figure in July, and confirming a growth higher, even in this case, than the estimates, which were for a decrease of 0.1%.
The core component of inflation further fueled investors’ fears, leaping by 6.3% on an annual basis in August, thus strengthening compared to + 5.9% in July, and well over the estimated + 6.1%; on a monthly basis, the core CPI index rose 0.6%, over the estimated + 0.3% and double the previous + 0.3% in July.
The numbers undermine hope that US inflation has peaked, and thus fuel fears that Jerome Powell’s Fed will continue on its path of aggressive rate hikes.
The next announcement on US rates is expected on 21 September: at this point, a tightening of 75 basis points, the third in a row, is considered inevitable.
Indeed, according to Nomura economist Rob Dent, the inflation figure could also increase “the risk of a tightening by 100 basis points, although this is not the baseline scenario”. In any case, the market according to Dent “should consider the possibility that there will be another rate hike of 75 points also in November”.
At this point, according to the CME Group’s FedWatch trend, fed funds futures are pricing in a 75 basis point rate hike for the third time, next week, with a 100% probability.