The Dow Jones Industrial Average fell more than 500 points on Tuesday as strong January inflation data dampened hopes that the Federal Reserve would start cutting interest rates next month.
The Dow Jones Industrial Average, which fell to 750 points, fell 1.4%, its worst day since March 2023. The S&P 500 Index fell 1.4%, and the tech-heavy Nasdaq Composite Index fell 1.8%.
The Dow and S&P 500, which had both hit record highs this year, fell after the consumer price index was released, posting a worse-than-expected annual rise of 3.1%.
The figure, which tracks changes in the cost of everyday goods and services, remains far from the Fed’s 2% goal.
Core CPI, which excludes volatile food and energy prices, rose 0.4% in January to 3.9%.
The figure, also a closely watched indicator of long-term trends among policymakers, was higher than economists expected.
“Everyone’s biggest concern is that inflation remains high, and this report shows that inflation is not coming down,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. said. “It’s a natural reaction for stocks and bonds to sell. It makes sense. We’ll then wait for the next report, but if it’s even lower, this will be just a temporary thing.”
The hike could delay the Fed’s expected three rate cuts in 2024.
Wall Street initially expected interest rates to be lowered for the first time from their current 22-year highs in March.
“It is unlikely that this committee will reach that level of confidence before its March meeting,” Fed Chairman Jerome Powell said after the policy meeting.
of CME FedWatch Tools May interest rates also show a significant deviation.
The probability of a May rate cut fell from 52.2% to 36.6% on Monday, while the probability of a June rate cut is now 78.6% from 92.2%.
said Atlanta Fed President Rafael Bostic, who will vote on this year’s Federal Open Market Committee policy decisions. CNN He said he expected the first of three cuts to occur in the fourth quarter. This comes weeks after the mid-year economic slowdown that Wall Street is currently predicting.
By the end of the year, he said, inflation would be in the “low second range” range.
“This is not like a TikTok video where trends pop up quickly. It takes time for individual decisions and millions of people to come together and start making trends,” he told CNN.
At the same time, Bostic warned that there are significant risks if the Fed leaves interest rates at current levels for too long.
He also pointed out how difficult it is to contain inflation as the job market remains surprisingly strong.
January’s monthly jobs report showed the economy added a huge 353,000 new jobs, almost double what analysts expected.
A Reuters/Ipsos poll released last month found that while inflation appears to be slowing, 22% of poll respondents said they are worried about the U.S. as it continues to struggle with inflation and other fallout from the COVID-19 pandemic. The economy continues to be the biggest concern for all citizens. .
Since taking office, Biden has called for lower prices at supermarkets, asked drug companies to lower the cost of insulin and hotel chains to lower fees, and sought to diversify the meat packaging industry as beef prices soared after the pandemic. Ta.
“Inflation remains at historically high levels and there is nothing to celebrate,” Alfred Ortiz, president and CEO of Job Creators Network, told the Post.
“If you talk to any American who goes to the grocery store, hardware store or pharmacy, they will tell you that prices continue to rise painfully.”
A December 2023 report on shrinkflation (when companies reduce the size of a product while keeping prices the same) found that household paper products were 34.9% more expensive per unit than they were in January 2019, with an increase in About 10.3% of the rolls and packages was found to be due to producers reducing the size.
The researchers also found that the price of snacks like Oreos and Doritos increased by 26.4% over the same period, with portion reductions accounting for 9.8% of that increase.
