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Inflation Report Shakes Markets: Dow, S&P, Nasdaq Fall

  • The Nasdaq Composite fell 5.2%, while the S&P 500 fell 4.3%.
  • The six largest US technology companies lost more than $500 billion on Tuesday.
  • Peloton (PTON) co-founder John Foley resigns 

After a shocking inflation report revealed that prices rose more than anticipated last month, U.S. stocks plummeted on Tuesday. Since June 2020, all three major averages experienced their worst day.

The Nasdaq Composite fell 5.2%, with technology stocks leading the decline. According to market data from analysts, Tuesday’s session marked the seventh time this year that the Nasdaq declined by 4% or more.

The following tech companies reported some of the largest losses:

  • Apple lost $154.11 billion in market capitalization and fell 5.87%, its biggest drop since September 2020.
  • Microsoft lost $109.33 billion and fell 5.5%, the most since September 2020.
  • Alphabet (Google’s parent company) lost $85.32 billion and fell 5.9%, its steepest drop since March 2020.
  • Amazon lost $98.11 billion and fell 7.06%, the worst since May 20, 2022.
  • Meta (formerly Facebook) lost $42.55 billion and dropped 9.37%, the highest since February 2022.
  • Nvidia lost $34.21 billion and fell 9.47%, the most since March 2020.

Higher rates are most detrimental to investments that are viewed as being the costliest or risky. 9.4% of Bitcoin was lost.

The Dow Jones Industrial Average lost more than 1,275 points, or about 4%, while the S&P 500 fell by 4.3%.

Early on Tuesday, the Bureau of Labor Statistics released its Consumer Price Index (CPI) for August, which revealed that prices increased by 0.1% over the previous month and 8.3% over the previous year. 

The 8.1% increase in inflation over last year and the 0.1% drop over the previous month were both below what economists had predicted.

In August, prices increased 6.3% over the previous year and 0.3% over the previous month on a “core” basis, which excludes the more volatile costs of food and energy. 

The cost of shelter, which increased by 0.7% over the previous month in August, the most since January 1991, is a major contributor to the steady rise in core inflation. A third of the CPI is made up of housing costs.

“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 Seema Shah, chief global strategist.

Investors are now pricing in an 82% chance of a 0.75% rate hike next week and an 18% chance of a 1% rate hike, according to data from the CME Group after Tuesday’s report.

This information showed a 75%-25% split between a 75-basis-point and a 50-basis-point rate increase last week.

The 10-year yield increased to approximately 3.44% on Tuesday, while the 2-year yield increased by 15 basis points to as high as 3.72%. There were also significant movements along the Treasury curve. 

Other news in the markets on Tuesday

Peloton (PTON), made the announcement that co-founder John Foley is resigning from the board of directors on Monday afternoon and months after hiring former Spotify executive Barry McCarthy as CEO.

On Tuesday, its shares fell 10.3% as a result of a wider market sell-off.

The company cut its full-year forecast and announced plans to lay off 24% of its corporate workforce, citing “potentially rougher macro conditions,” which caused shares of Rent the Runway (RENT) to plunge more than 38%.

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Author

  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.

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