US Stocks Plunge 470 Points as Inflation Surges: Market Update
In a volatile trading session, US stocks faced a significant downturn on Wednesday following a hotter-than-expected inflation report. The Dow Jones Industrial Average led the decline, shedding over 450 points as traders recalibrated their expectations for Federal Reserve rate cuts amid soaring inflationary pressures.
Bond yields also surged, with the 10-year Treasury yield climbing by 10 basis points to reach 4.474%. The spike in yields reflected growing concerns about the persistence of inflation, prompting investors to reassess the likelihood of aggressive rate cuts by the Fed.
March witnessed a notable acceleration in consumer prices, surpassing economists’ forecasts. Consumer prices rose by 0.4% for the month, translating to a year-on-year increase of 3.5%. Core inflation, excluding volatile food and energy prices, surged to 3.8% year-on-year, exceeding the anticipated 3.7% figure.
The persistent rise in inflationary pressures has dashed hopes of imminent Fed rate cuts, with market expectations undergoing a significant revision. The probability of a substantial rate cut of 100 basis points or more has dwindled to a mere 6%, down from a substantial 61% a month ago, as indicated by the CME FedWatch tool.
Greg McBride, Chief Financial Analyst at Bankrate, expressed pessimism about the prospects of rate cuts, emphasizing the unfavorable inflationary trend. McBride remarked, “You can kiss a June rate cut goodbye,” underscoring the adverse direction of inflation.
Furthermore, Seema Shah, Chief Global Strategist at Principal Asset Management, suggested that the robust inflationary readings might even preclude the possibility of a July rate cut. Shah emphasized the sustained nature of inflationary pressures, signaling caution within the Fed regarding monetary policy adjustments.
