cloudy.png
Saturday December 3rd, 2022 2:46PM

Markets shudder on dashed inflation hopes; Dow falls 1,250

By The Associated Press
Related Articles
  Contact Editor

NEW YORK (AP) — The Dow Jones Industrial Average sank more than 1,250 points Tuesday, its steepest sell-off in more than two years, after a government report showed that inflation is maintaining a surprisingly strong grip on the U.S. economy.

The S&P 500 sank 4.3%, its biggest drop since June 2020. The Dow fell 3.9% and the Nasdaq composite closed 5.2% lower. The sell-off ended a four-day winning streak for the major stock indexes and erased an early rally in European markets.

Bond prices also fell sharply, sending their yields higher, after a report showed inflation decelerated only to 8.3% in August, instead of the 8.1% economists expected.

The hotter-than-expected reading has traders bracing for the Federal Reserve to ultimately raise interest rates even higher than expected to combat inflation, with all the risks for the economy that entails. Fears about higher rates sent prices dropping for everything from gold to cryptocurrencies to crude oil.

“Right now, it’s not the journey that’s a worry so much as the destination,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “If the Fed wants to hike and hold, the big question is at what level.”

The S&P 500 fell 177.72 points to 3,932.69. The drop didn’t quite knock out its gains over the past four days. The index is now down 17.5% so far this year.

The Dow lost 1,276.37 points to 31,104.97, and the Nasdaq dropped 632.84 points to 11,633.57.

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.

Most of Wall Street came into the day thinking the Fed would hike its key short-term rate by a hefty three-quarters of a percentage point at its meeting next week. But the hope was that inflation was in the midst of quickly falling back to more normal levels after peaking in June at 9.1%.

The thinking was that such a slowdown would let the Fed downshift the size of its rate hikes through the end of this year and then potentially hold steady through early 2023.

Tuesday’s report dashed some of those hopes.

“This piece of data just hammered home that the Fed isn’t going to have the data to do anything differently than continue on their rate-raising path for longer,” said Tom Martin, senior portfolio manager with Globalt Investments. “It just increases the chance of an actual recession."

Many of the data points within the inflation report were worse than economists expected, including some the Fed pays particular attention to, such as inflation outside of food and energy prices.

Markets honed in on a 0.6% rise in such prices during August from July, double what economists expected, said Gargi Chaudhuri, head of investment strategy at iShares.

The inflation figures were so much worse than expected that traders now see a one-in-three chance for a rate hike of a full percentage point by the Fed next week. That would be quadruple the usual move, and no one in the futures market was predicting such a hike a day earlier.

The Fed has already raised its benchmark interest rate four times this year, with the last two increases by three-quarters of a percentage point. The federal funds rate is currently in a range of 2.25% to 2.50%.

“The Fed can't let inflation persist. You have to do whatever is necessary to stop prices from going up," said Russell Evans, managing principal at Avitas Wealth Management. “This indicates the Fed still has a lot of work to do to bring inflation down.”

Higher rates hurt the economy by making it more expensive to buy a house, a car or anything else bought on credit. Mortgage rates 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.

Tuesday's data puts hopes for such a “soft landing” under more threat. In the meantime, higher rates also push down on prices for stocks, bonds and other investments.

Investments seen as the most expensive or the riskiest are the ones hardest hit by higher rates. Bitcoin tumbled 9.4%.

To be sure, the stock market's losses only return the S&P 500 close to where it was before its recent winning streak. That run was built on hopes that Tuesday's inflation report would show a more comforting slowdown. The ensuing wipeout fits what's become a pattern on Wall Street this year: Stocks fall on worries about inflation, turn higher on hopes the Fed may ease up on rates and then fall again when data undercuts those hopes.

Treasury yields leaped immediately on expectations for a more aggressive Fed. The yield on the two-year Treasury, which tends to track expectations for Fed actions, soared to 3.74% from 3.57% late Monday. The 10-year yield, which helps dictate where mortgages and rates for other loans are heading, rose to 3.42% from 3.36%.

Expectations for a more aggressive Fed also helped the dollar add to its already strong gains for this year. The dollar has been surging against other currencies in large part because the Fed has been hiking rates faster and by bigger margins than many other central banks.

___

AP Business Writer Damian J. Troise contributed. Veiga reported from Los Angeles.

  • Associated Categories: Associated Press (AP), AP National News, AP Online National News, Top General short headlines, AP Business, AP Business - Economy, AP Business - Financial Markets, AP Business - Industries, AP Business - Financial Services
© Copyright 2022 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Jury gets R. Kelly's child pornography and trial-fixing case
Jurors have begun deliberating in R. Kelly’s federal trial in Chicago on charges accusing him of making child pornography and rigging his 2008 child porn trial
5:14PM ( 15 minutes ago )
Markets shudder on dashed inflation hopes; Dow falls 1,250
The stock market fell the most since June 2020 following Wall Street’s humbling realization that inflation is not slowing as much as hoped
5:14PM ( 16 minutes ago )
Family of Colorado man shot by police wants accountability
Family members are asking for accountability in the death of a 22-year-old Colorado man who was shot by police earlier this year after calling 911 for roadside assistance
5:13PM ( 16 minutes ago )
Associated Press (AP)
Midterm primaries wrap up with fresh test of GOP's future
A staunchly conservative, retired Army general is favored to win New Hampshire’s Republican Senate nomination and face potentially vulnerable Democratic Sen. Maggie Hassan
4:30PM ( 59 minutes ago )
In 2nd Jones trial, FBI agent at Sandy Hook breaks down
An FBI agent struggled to control his emotions as he described on the witness stand seeing bodies inside Sandy Hook elementary school -- a scene that the conspiracy theorist Alex Jones later claimed was staged by actors
4:29PM ( 1 hour ago )
Casket of Queen Elizabeth II arrives at Buckingham Palace
The coffin of Queen Elizabeth II has arrived at Buckingham Palace after traveling through a drizzly London as crowds lined the route to bid her a final farewell
4:16PM ( 1 hour ago )
AP National News
What's left as Jan. 6 panel sprints to year-end finish
The House Jan. 6 committee is eyeing a close to its work and a final report laying out its findings about the U.S. Capitol insurrection by the end of the year
3:09PM ( 2 hours ago )
Casket of Queen Elizabeth II returns home to London
The coffin of Queen Elizabeth II has returned to a drizzly Londay, making its way toward the monarch’s home Buckingham Palace as crowds lined the route to catch a glimpse of the hearse and to bid her a final farewell
2:53PM ( 2 hours ago )
Alex Jones faces second trial over Sandy Hook hoax claims
A Connecticut jury has begun hearing arguments about how much money conspiracy theorist Alex Jones should pay relatives of victims of the Sandy Hook Elementary School shooting for calling the massacre a hoax
2:15PM ( 3 hours ago )
AP Online National News
Armenia, Azerbaijan report 99 troops killed in border clash
Fighting on the border between Armenia and Azerbaijan has killed about 100 troops and fed fears of broader hostilities breaking out between the longtime adversaries
2:14PM ( 3 hours ago )
R. Kelly lawyer: Prosecution case relies on ‘perjurers’
R. Kelly’s lead attorney has told jurors that federal prosecutors’ case accusing the singer of producing child pornography, enticing minors for sex and rigging his 2008 child porn trial largely rests on the testimony of perjurers and blackmailers
12:25PM ( 5 hours ago )
'A seat at the table': Peltola to be sworn in to Congress
Mary Peltola will be making history when she's sworn in as the first Alaska Native to serve in Congress
12:21PM ( 5 hours ago )
Top General short headlines
Emmys reach record-low audience of 5.9 million people
The Emmy Awards reached a record-low audience of 5.9 million people on NBC Monday night
4:42PM ( 48 minutes ago )
Amazon Prime ready to kick off 'Thursday Night Football'
Thursday night’s game between the Los Angeles Chargers and Kansas City Chiefs on Prime Video kicks off an 11-year agreement between Amazon and the NFL and marks the first time the league has sold a package of games to a streaming service
4:37PM ( 53 minutes ago )
'Woman King,' Viola Davis and the culmination of a struggle
When Viola Davis, sculpted and hardened from months of training, first stood in the full garb of the Agojie warrior women, with her bare feet in the African sand, it was the culmination of not just the years-long push to make “The Woman King,” but of a lifelong battle
3:42PM ( 1 hour ago )
AP Business
Stocks tumble after inflation stays hotter than expected
Stocks are tumbling and disappointment is hitting markets worldwide, following Wall Street’s sudden realization that inflation isn’t slowing as much as hoped
10:43AM ( 6 hours ago )
Stocks tumble on hotter-than-expected inflation report
Stocks are tumbling Tuesday as Wall Street comes to the realization that inflation isn’t slowing as much as it had hoped
9:36AM ( 7 hours ago )
US futures turn lower as inflation persists
Wall Street futures swung sharply lower before the opening bell after new data showed inflation in the U.S. slowed moderately, but likely not enough to divert the aggressive push by the Federal Reserve to curb rising costs through interest rate hikes
9:14AM ( 8 hours ago )
AP Business - Economy
Goddess gowns, Old Hollywood glam and pink rule Emmy carpet
Hannah Waddingham paired her Dolce & Gabbana goddess gown with bedazzled high top sneakers, and Elle Fanning went Old Hollywood glam at the Emmys on Monday
11:26PM ( 18 hours ago )
Goddess gowns, Old Hollywood glam and red rule Emmy carpet
Hannah Waddingham paired her Dolce & Gabbana goddess gown with bedazzled high top sneakers, and Elle Fanning went Old Hollywood glam at the Emmys on Monday
9:40PM ( 19 hours ago )
Lebanon: Central Bank lifts all expensive fuel subsidies
The Lebanese Central Bank has lifted its remaining subsidies on fuel
9:38PM ( 19 hours ago )
AP Business - Financial Markets
German man convicted of murder after killing over mask rules
A German man has been convicted of murder and given a life sentence for fatally shooting a young gas station clerk following a dispute over face masks
9:01AM ( 8 hours ago )
As data centers proliferate, neighbors knock the noise
Northern Virginia has established itself as the world's largest home for data centers
8:53AM ( 8 hours ago )
Dubai court rejects Danish extradition request for financier
An Emirati court has ruled that a British man suspected of masterminding a $1.7 billion tax scheme cannot be extradited to Denmark to face charges
9:40PM ( 19 hours ago )
AP Business - Industries
US markets point higher ahead of a week of inflation data
Wall Street is pointed toward gains before the opening bell, building on last week’s strong finish as investors await more inflation data this week
8:11AM ( 1 day ago )
World shares advance after Wall Street's end of week rally
Shares have climbed in Europe and Asia after last week's strong close on Wall Street, the first weekly gain in four weeks
4:21AM ( 1 day ago )
Asian shares rise on back of Wall Street rally
Shares have climbed in Asia after last week's strong close on Wall Street, the first weekly gain in four weeks
2:23AM ( 1 day ago )
AP Business - Financial Services
Jury gets R. Kelly's child pornography and trial-fixing case
Jurors have begun deliberating in R. Kelly’s federal trial in Chicago on charges accusing him of making child pornography and rigging his 2008 child porn trial
5:14PM ( 16 minutes ago )
Family of Colorado man shot by police wants accountability
Family members are asking for accountability in the death of a 22-year-old Colorado man who was shot by police earlier this year after calling 911 for roadside assistance
5:13PM ( 17 minutes ago )
Starbucks to revamp stores to speed service, boost morale
Starbucks plans to spend $450 million next year to make its North American stores more efficient and less complex
5:12PM ( 18 minutes ago )
Ukrainian troops keep up pressure on fleeing Russian forces
Ukrainian troops are piling pressure on retreating Russian forces, pressing deeper into occupied territory and sending more Kremlin troops fleeing ahead of the counteroffensive that has inflicted a stunning blow on Moscow’s military prestige
5:02PM ( 28 minutes ago )
Blankenship loses job with Colts after missed FG in Houston
Rodrigo Blankenship's tenure with the Indianapolis Colts is over
5:00PM ( 30 minutes ago )