The Dow Jones Industrial Average tumbled more than 1,200 points Tuesday after August's consumer price index report showed higher-than-expected inflation, according to economists. File Photo by John Angelillo/UPI | License Photo
Sept. 13 (UPI) -- U.S. stocks plummeted Tuesday in the market's worst day since June 2020, hours after a key inflation report showed prices rose more than expected in August.
The Dow Jones Industrial Average shed 1,276 points, or roughly 4%, to 31,105, with technology stocks leading the way. Facebook-parent Meta lost 8%, while Caesars Entertainment shed 7.3%.
High-growth tech stocks Carvana slid more than 13%, Cloudflare fell more than 9% and Unity Software shed 12%.
Overall, the Nasdaq Composite plunged 5.2% and the S&P 500 dropped 4.3%. It was the worst day for all three major averages in two years.
The big selloff came hours after the Bureau of Labor Statistics released its August consumer price index Tuesday that showed higher-than-expected inflation, according to economists.
The Index showed inflation increased by 0.1% from July to August, even with falling gas prices. Inflation came in at 8.3% on a year-over-year basis.
Economists surveyed by Dow Jones had been expecting a decline of 0.1% for overall inflation with an 8.1% inflation rate over last year. Core inflation, which includes the cost of shelter, rose 0.6% month-over-month.
"Headline inflation has peaked but, in a clear sign that the need to continue hiking rates is undiminished, core CPI is once again on the rise, confirming the very sticky nature of the U.S. inflation problem," said Seems Shah, chief global strategist at Principal Global Investors.
"The CPI report was an unequivocal negative for equity markets. The hotter than expected report means we will get continued pressure from Fed policy via rate hikes," said Matt Peron, director of research at Janus Henderson Investors.
"It also pushes back any 'Fed pivot' that the markets were hopeful for in the near term."
Tuesday's big stock drop erased nearly all of the gains registered in four straight positive sessions, as many investors believed inflation had peaked. Analysts had hoped the Fed would ease-off its interest-rate increases with better inflation data.
August's CPI report is one of the last reports the Federal Reserve will see before its meeting next week, when the central bank is expected to deliver a third 0.75 percentage point interest rate hike to control inflation.
Chris Shipley, chief investment strategist for North America at Northern Trust Asset Management, said it "increases the probability of recession if the Fed has to move more significantly to address inflation."