On Tuesday, all three major indexes fell after worse-than-expected inflation data raised concerns that the Federal Reserve will need to continue raising interest rates aggressively to keep prices under control.
The Dow Jones Industrial Average dropped nearly 1,300 points, while the broad-based S&P 500 dropped more than 4%.
Both indices had their worst day since June 2020.
The Nasdaq fell even further, dropping more than 5% for its worst day since March 2020.
According to the most recent consumer price index, prices increased by 8.3% year on year in August. While lower than in June, inflation did not slow as much as Wall Street had anticipated.
The inflation data surprised investors. They had hoped that prices would have fallen further in August.
JEAN-PIERRE : “Today’s CPI data shows more progress in bringing global inflation down here at home.”
Inflation surged 8.3%.
Real wages are DOWN 2.8%.
Grocery prices surged 13.5%, the most since 1979.
Electricity skyrocketed 15.8%, the most since 1981. pic.twitter.com/4fsu6Wuihv
— RNC Research (@RNCResearch) September 13, 2022
However, the most recent CPI data shows that a wide range of items, including necessities such as food, electricity, and rent, are continuing to rise in price.
The all items index increased 8.3% before seasonal adjustment over the last 12 months, less than the 8.5% increase for the period ending July.
The largest contributors to the broad-based monthly all-items increase were increases in the shelter, food, and medical care indexes. These gains were largely offset by a 10.6% drop in the gasoline index. The food index increased 0.8% month on month, while the food at home index increased 0.7%.
Over the month, the energy index fell 5.0% as the gasoline index fell, but the electricity and natural gas indexes rose. The energy index increased 23.8 percent in the year ending August, less than the 32.9 percent increase in the year ending July.
Markets now expect the Fed to raise interest rates by three-quarters of a percentage point at its meeting next week, the third such hike in a row.
Some traders predicted that the Fed would raise interest rates by a full percentage point.