Inflation driven Dow plunge is worst in 11 months

Dow Jones Industrial Average posted its worst day in 11 months

U.S. stocks tumbled in a broad sell-off after a hotter-than-expected inflation report may jeopardize the Federal Reserve’s plan to cut interest rates.

The Dow Jones Industrial Average fell 524 points or 1.3%, trimming a deficit of over 700 points reached during the session. It was the worst trading day in 11 months. 

The benchmark has erased almost half its gains for 2024 with the 10-year Treasury yield hitting 4.3%. 

Ticker Security Last Change Change %
I:DJI DOW JONES AVERAGES 38778.1 +188.94 +0.49%

The consumer price index for January rose by 3.1% on an annual basis, higher than the 2.9% economists surveyed by Refinitiv expected. The producer price index, due Wednesday, will also be closely watched.  

CONSUMER INFLATION FOR JANUARY COMES IN HOT

"We continue to expect the FOMC to leave the Fed funds rate unchanged at the March meeting and to begin the easing cycle in May," said Jan Hatzius, chief economist at Goldman Sachs, in a note to clients on Tuesday. 

While over 91% of market participants agree with Hatzius, the majority, 62%, don't expect any move at the May meeting, according to the CME's Fed Watch Tool. Expectations for June are even more iffy, with just 24% expecting a cut. 

JANUARY INFLATION BREAKDOWN: WHERE PRICES ARE RISING THE MOST

Dow Jones Industrial Average

The S&P 500 and Nasdaq Composite slid 1.4% and 1.8%, respectively. 

Ticker Security Last Change Change %
SP500 S&P 500 5473.23 +41.63 +0.77%
I:COMP NASDAQ COMPOSITE INDEX 17857.020241 +168.14 +0.95%

All 11 of the S&P's major sectors fell, with real estate, utilities and financials pacing the drop, while energy and health care companies fell the least. 

Ticker Security Last Change Change %
XLRE SELECT SECTOR SPDR TRUST REAL ESTATE SELECT SECTOR S 38.33 -0.20 -0.52%
XLU UTILITIES SELECT SECTOR SPDR ETF 69.17 -0.77 -1.10%
XLF FINANCIAL SELECT SECTOR SPDR ETF 40.99 +0.34 +0.84%
XLE ENERGY SELECT SECTOR SPDR ETF 88.27 +0.23 +0.26%
XLV HEALTH CARE SELECT SECTOR SPDR ETF 145.74 -0.14 -0.10%

The surprise inflation report, which showed prices for about 19 items reignited in January, comes after President Biden celebrated the S&P 500 crossing the 5,000 level for the first time last week. It may present political challenges for Biden, who recently touted the market as part of his reelection campaign.

S&P 500 CLOSES ABOVE 5,000 FOR FIRST TIME

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