Stock market today: Wall Street falls after hot inflation report

NEW YORK (AP) A washout on Wall Street sent stocks tumbling Wednesday as concerns grew over what appeared to be a mishap in the market. battle to bring down inflation is turning into a worrying trend.

The S&P 500 fell 0.9% and the vast majority of stocks in the index fell. The Dow Jones Industrial Average fell 422 points, or 1.1%, and the Nasdaq composite fell 0.8%.

Treasury yields also jumped in the bond market, increasing pressure on the stock market, after a report showed inflation was higher last month than economists expected. It's the third consecutive report suggesting that progress in reducing high inflation may be stalling. This undermines hopes that the disappointing inflation data in January and February was not as bad as it appeared for technical reasons.

There are still embers of inflation here and there in the economy, said Joe Davis, chief global economist at Vanguard.

For shoppers, this is painful because of the possibility of even higher prices in store. For Wall Street, this raises fears that the Federal Reserve will show restraint. lower interest rates that traders want and bet on.

The S&P 500 has already jumped more than 20% since Halloween, partly on expectations that the Federal Reserve will cut its main interest rate, which is at its highest level in more than two decades. Such cuts would ease pressure on the economy and encourage investors to pay higher prices for stocks, bonds, cryptocurrencies and other investments.

But the Fed is awaiting additional evidence that inflation is moving sustainably toward its 2% target. After an encouraging cooling last year, there are now fears that inflation will remain stuck after January, FEBRUARY and the March inflation reports were all hotter than expected, along with the inflation data. economy in general.

Two data points don't determine a trend, but maybe three, said Brian Jacobsen, chief economist at Annex Wealth Management.

If we get one more reading like this, the Fed's discussions will shift from whether to cut rates to whether to raise rates.

Prices of everything from bonds to gold fell immediately after the morning inflation data was released.

The yield on 10-year Treasury bills jumped to 4.54% from 4.36% Tuesday evening and returned to its November level. The two-year yield, which moves more in line with expectations about Fed action, climbed further from 4.74% to 4.97%.

Traders sharply reduced their bets that the Fed could begin cutting rates in June. They now see only a 17% chance of that happening, down from nearly 74% a month ago, according to CME Group's FedWatch tool.

Perhaps more importantly, traders have bet more on a Fed rate cut just twice this year. At the beginning of the yearthey predicted six or more reductions through 2024.

High interest rates have the effect of dampening inflation by slowing the economy and hurting investment prices. The fear is that rates that are too high for too long could cause a recession.

Wall Street's biggest losers Wednesday were real estate investment trusts, utility companies and other stocks that tend to be hit hardest by high interest rates.

Real estate stocks in the S&P 500 fell 4.1%, by far the biggest loss among the 11 sectors that make up the index. That included a 6.1% drop for office landlord Boston Properties and a 5.3% fall for Alexandria Real Estate Equities.

Homebuilders also fell because higher interest rates could cripple the real estate industry by making mortgages more expensive. DR Horton fell 6.4%, Lennar fell 5.8% and PulteGroup fell 5.2%.

Overall, the S&P 500 fell 49.27 points to 5,160.64. The Dow Jones fell 422.16 to 38,461.51 and the Nasdaq composite fell 136.28 to 16,170.36.

Critics had previously said the U.S. stock market seemed overpriced in several ways. They said either interest rates needed to fall or corporate profits needed to recover to make stock prices appear more reasonable. The hope on Wall Street is that the resilience of the U.S. economy can help support earnings, even as it dims hopes of a rate cut.

Major U.S. companies are lining up to say how much profit they made in the first three months of the year, and Delta Air Lines helped kick off the reporting season by delivering better-than-expected results.

The airline said it was seeing high demand for flights around the world, and she expects this strength to continue until spring. But it also stopped short of raising its profit forecast for the full year. Its stock climbed up to 4% in the morning before falling back to a loss of 2.3%.

The banking sector will soon be in the spotlight during earnings season, with JPMorgan Chase and Wells Fargo among those reporting on Friday.

In foreign stock markets, indices were mixed across much of Europe. In Asia, shares rose 1.9% in Hong Kong but fell 0.7% in Shanghai after Fitch Ratings has lowered its outlook for Chinese public finances.