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Wall Street got routed on Tuesday in its biggest one-day drop since Jun 11, 2020. The market snapped a four-day winning streak and stocks plummeted with the emergence of higher-than-expected inflation numbers. Investors remain apprehensive that the Fed’s monetary policy tightening would be more severe than expected earlier. All three major stock indexes plunged yesterday.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 3.9% or 1276.37 points, to close at 31,104.97. All the components of the 30-stock index ended in negative territory.
The tech-heavy Nasdaq Composite sank 632.84 points or 5.2% to 11,633.57.
The S&P 500 dropped 4.3%, or 177.72 points, to end at 3,932.69. All the 11 broad sectors of the benchmark index closed in the red. The Communication Services Select Sector SPDR (XLC), the Technology Select Sector SPDR (XLK) and the Consumer Discretionary Select Sector SPDR (XLY) plummeted 5.5%, 5.3% and 5.2%, respectively.
The fear-gauge CBOE Volatility Index (VIX) increased 14.2% to 27.27. A total of 11.6 billion shares were traded on Tuesday, higher than the last 20-session average of 10.3 billion. Decliners outnumbered advancers on the NYSE by a 7.76-to-1 ratio. On the Nasdaq, a 3.64-to-1 ratio favored the declining issues.
August CPI Report Bears Down on The Market
Investors eagerly awaited the CPI numbers for August, ahead of the Fed’s September meeting slated for next week. General expectations were that inflation would have regressed slightly, in the region of 0.1%, for the month, thus forcing the Fed to go slow on policy tightening. All this conjecture was put to rest with the emergence of the CPI numbers on Tuesday, which showed that year over year, inflation increased 8.3%, 30 bps higher than expected and 0.1% more than July. Core CPI, which increased 6.3% year over year was expected to increase. However, even this number has come in hotter than expected with a 0.6% increase over July. This is double the consensus and that of last month’s increase of 0.3%.
With inflation rising rather than slightly going down as per consensus, any relief expected by investors vanished into thin air, and the session culminated into the worst trading day since June 2020. The numbers that have come out are way off-peak from the levels seen earlier in the year. However, the very fact that monthly inflation is going up even after accelerated interest rate hikes by the Fed over the past few months, has cast a pall over the market.
So far, expectations from the Fed are that they would be pushing up the interest rate in their bid to tackle inflation but would do so in the range of 50 to 75 bps. The market had already priced this in and was closing in the green in the recent sessions. But now, with the numbers as they are, fear is rife that the Fed may well be on its way to a 100 bps hike in the September meeting. Also, any talks of the Fed easing off on policy tightening after the September meet, or in the the near term, has taken a backseat.
At the very least, it seems likely that the central bank would keep raising rates through early 2023. Whatever the chances of the Fed sending the economy into a recession were before Tuesday, they should have been compounded now. Consumer Discretionary and tech stocks were hit particularly hard, with the tech-subset semiconductor bearing the maximum impact.
Image: Bigstock
Stock Market News for Sep 14, 2022
Wall Street got routed on Tuesday in its biggest one-day drop since Jun 11, 2020. The market snapped a four-day winning streak and stocks plummeted with the emergence of higher-than-expected inflation numbers. Investors remain apprehensive that the Fed’s monetary policy tightening would be more severe than expected earlier. All three major stock indexes plunged yesterday.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 3.9% or 1276.37 points, to close at 31,104.97. All the components of the 30-stock index ended in negative territory.
The tech-heavy Nasdaq Composite sank 632.84 points or 5.2% to 11,633.57.
The S&P 500 dropped 4.3%, or 177.72 points, to end at 3,932.69. All the 11 broad sectors of the benchmark index closed in the red. The Communication Services Select Sector SPDR (XLC), the Technology Select Sector SPDR (XLK) and the Consumer Discretionary Select Sector SPDR (XLY) plummeted 5.5%, 5.3% and 5.2%, respectively.
The fear-gauge CBOE Volatility Index (VIX) increased 14.2% to 27.27. A total of 11.6 billion shares were traded on Tuesday, higher than the last 20-session average of 10.3 billion. Decliners outnumbered advancers on the NYSE by a 7.76-to-1 ratio. On the Nasdaq, a 3.64-to-1 ratio favored the declining issues.
August CPI Report Bears Down on The Market
Investors eagerly awaited the CPI numbers for August, ahead of the Fed’s September meeting slated for next week. General expectations were that inflation would have regressed slightly, in the region of 0.1%, for the month, thus forcing the Fed to go slow on policy tightening. All this conjecture was put to rest with the emergence of the CPI numbers on Tuesday, which showed that year over year, inflation increased 8.3%, 30 bps higher than expected and 0.1% more than July. Core CPI, which increased 6.3% year over year was expected to increase. However, even this number has come in hotter than expected with a 0.6% increase over July. This is double the consensus and that of last month’s increase of 0.3%.
With inflation rising rather than slightly going down as per consensus, any relief expected by investors vanished into thin air, and the session culminated into the worst trading day since June 2020. The numbers that have come out are way off-peak from the levels seen earlier in the year. However, the very fact that monthly inflation is going up even after accelerated interest rate hikes by the Fed over the past few months, has cast a pall over the market.
So far, expectations from the Fed are that they would be pushing up the interest rate in their bid to tackle inflation but would do so in the range of 50 to 75 bps. The market had already priced this in and was closing in the green in the recent sessions. But now, with the numbers as they are, fear is rife that the Fed may well be on its way to a 100 bps hike in the September meeting. Also, any talks of the Fed easing off on policy tightening after the September meet, or in the the near term, has taken a backseat.
At the very least, it seems likely that the central bank would keep raising rates through early 2023. Whatever the chances of the Fed sending the economy into a recession were before Tuesday, they should have been compounded now. Consumer Discretionary and tech stocks were hit particularly hard, with the tech-subset semiconductor bearing the maximum impact.
Consequently, shares of Advanced Micro Devices, Inc. (AMD - Free Report) and Netflix, Inc. (NFLX - Free Report) plunged 9% and 7.8%, respectively. Both stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.