US close: Dow loses almost 1,300 points after hot CPI reading

adollarmakemeholler — Sharecast / Pixabay

Wall Street stocks tumbled to the close in their worst session in more than two years on Tuesday, after August's CPI reading came in hotter than expected.

At the close, the Dow Jones Industrial Average was down 3.94% at 31,104.97, as the S&P 500 lost 4.32% to 3,932.69, and the Nasdaq Composite was off 5.16% at 11,633.57.

The Dow closed 1,276.37 points lower on Tuesday, more than erasing the gains it recorded on Monday.

“Today’s above-expectations CPI figure has dashed hopes of a more dovish Fed, and seems to have brought the rally of the past few sessions to an end,” said IG chief market analyst Chris Beauchamp.

“Dip-buying momentum had been gathering pace, but with prices back on an upward trajectory the mood has turned decidedly sour.

"A 75 basis point hike is back on the cards as the most likely outcome at the next FOMC get-together, and as a result the market is back to selling equities and buying the dollar.”

Tuesday's primary focus was news that US consumer price inflation slowed in August but was still above expectations, according to the Labor Department, fuelling expectations of another big rate hike from the Federal Reserve.

Inflation eased to 8.3% on the year, from 8.5% in July, but came in above expectations of 8.1%.

On a monthly basis, consumer price inflation rose 0.1%, compared to a flat reading in July.

Core inflation, meanwhile, which strips out food and energy, increased to 6.3% in August from 5.9% a month earlier.

Elsewhere, talk of a railroad strike was also drawing investor attention, with fears that any walkout could put further pressure on already-strained supply chains.

A strike was said to potentially cost the economy roughly $2bn every day, disrupt the retail industry, and weigh on retail giants and logistics companies' profit expectations.

Elsewhere on the macro front, the National Federation of Independent Business' small business optimism index increased for a second month In August, rising to 91.8 from 89.9 in July, with falling energy prices offering some relief.

The percentage of business owners anticipating improved business conditions over the next six months increased 10 points to -42%.

In equities, the technology behemoths were among the leading losers, with Google parent Alphabet off 5.9%, Amazon down 7.06%, Apple losing 5.87%, Microsoft sliding 5.5%, and Tesla 4.04% weaker.

Peloton Interactive tumbled 10.32% after confirming the resignations of co-founders John Foley and Hisao Kushi overnight on Monday.

Positive moves were extremely thin on the ground, with fertiliser-focussed materials among the only bright spots, as Corteva added 0.87% and Mosaic gained 0.32%.

Reporting by Josh White at Sharecast.com. Additional reporting by Iain Gilbert.

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