Markets shudder on dashed inflation hopes; Dow falls 1,250 points
The stock market on Tuesday fell the most since June 2020 after Wall Street’s humbling realization that inflation is not slowing as much as hoped.
Tuesday’s report dashed some of those hopes. Many of the data points within it were worse than economists expected, including some the Fed pays particular attention to, such as inflation excluding food and energy prices. Traders now see a better than 60% likelihood the Fed will pull its federal funds rate all the way up to a range of 4.25% to 4.50% by March. A day earlier, they saw less than a 17% chance of such a high rate, according to CME Group.
Higher rates hurt the economy by making it more expensive to buy a house, a car or anything else bought on credit.have already hit their highest level since 2008, creating pain for the housing industry. The hope is that the Fed can pull off the tightrope walk of slowing the economy enough to snuff out high inflation but not so much that it creates a painful recession.
In the stock market, all but six of the stocks in the S&P 500 fell. Technology and other high-growth companies fell more than the rest of the market because they’re seen as most at risk from higher rates. Tuesday’s inflation report arrived before trading began on Wall Street, but it sent a thud through markets worldwide.
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