Stocks sold off Wednesday as new U.S. inflation data dented trader hopes of a large Federal Reserve rate cut later next week.
The S&P 500 traded 1.1% lower, while the Dow Jones Industrial Average lost 548 points, or 1.4%. The Nasdaq Compositeshed about 0.7%.
UnitedHealth Group, Travelers and Amgen dragged the Dow lower. Bank stocks also continued to weigh on the broader market, with JPMorgan Chase shares down more than 1.5% after the company gave cautious commentary on Tuesday regarding the firm’s net interest income in 2025.
Stocks tumbled after the core reading on the consumer price index, which strips out volatile food and energy categories — rose slightly more than expected. This dampened investor hopes for a half-point rate cut from the Federal Reserve. Traders are now pricing in an 85% chance that the central bank will approve a 25 basis point interest rate reduction at its Sept. 17-18 meeting, according to the CME Group’s FedWatch measure. Overall CPI, however, hit its lowest annualized level since February 2021.
“Taken on its own, [CPI] is not terrible,” said Steve Sosnick, chief strategist at Interactive Brokers. “But what the market did not need was a core reading that was higher than expected. I think it was a big splash of cold water on a market that was hopeful that a 50 basis-point rate cut might be in the cards. Those expectations have all but evaporated.”
The new data comes as investors grapple with seasonal headwinds. September has been the worst month for the S&P 500 over the last 10 years, averaging a loss of more than 1% during that time. The broad-market index has also posted a loss in September in the last four years.
