Wall Street stocks and bond prices fell on Tuesday and the dollar rose after closely watched U.S. inflation data for August came in more than expected, fueling fears of more aggressive interest rate hikes from the U.S. Federal Reserve.
The broader S&P 500 fell 2.6 percent, while the Nasdaq Composite — loaded with tech companies that are highly sensitive to changes in interest rate expectations — fell 3.3 percent.
The moves came after a report on Tuesday showed U.S. consumer prices rose 0.1 percent in August, compared with expectations for a 0.1 percent drop from the previous month. The annual rate came in at 8.3 percent from 8.5 percent in July, but was higher than the 8.1 percent Wall Street economists had forecast.
Core consumer price growth — which strips out volatile items such as energy and food — rose to 6.3 percent from 5.9 percent.
“The [consumer price index] The report was unequivocally negative for the stock markets. A hotter-than-expected report means we will continue to be under pressure [Federal Reserve] Policy through rate hikes. “This reverses any ‘Fed Pivot’ where markets were optimistic about the future,” said Matt Perron, director of research at Janus Henderson Investors.
In government debt markets, the yield on the two-year U.S. Treasury note rose 0.17 percentage points to 3.74 percent, reflecting a sharp drop in bond prices. The 10-year yield rose 0.07 percentage points to 3.43 percent.
Germany’s two-year bund yield was up 0.09 percentage points to 1.39 percent, while the 10-year yield was up 0.07 percentage points to 1.72 percent.
The dollar rose 1 percent against six peers, both down about 1 percent, as the euro and pound retreated.
Tuesday’s inflation report was widely expected ahead of the U.S. Federal Reserve’s next monetary policy meeting at the end of September. Markets are pricing in the likelihood of a third consecutive 0.75 percentage point interest rate hike by the central bank and further rate hikes in November and December. of Central Bank The current target range is 2.25 to 2.50 percent.
“Markets often react violently to every report,” said Jim Paulson, chief investment officer at Leuthold Group. “I’m sure the feds are looking at a lot of reports and realizing past economic policies . . . [such as rate rises] There are lagged implications on inflation and growth, which will already dampen both at least next spring.”
In Europe, the regional Stoxx 600 fell 1.1 percent after rising 1.8 percent in the previous session. London’s FTSE 100 lost 0.9 percent.
In Asia, mainland China’s CSI 300 index rose 0.4 percent and Hong Kong’s Hang Seng fell 0.2 percent, as markets in greater China reopened following a national holiday. Japan’s Topix rose 0.3 percent.