The stock market experienced a significant downturn as the Dow Jones Industrial Average plummeted by 524 points following an unexpected shock in the January Consumer Price Index (CPI). This sudden decline sent shockwaves through the financial world, leaving investors and analysts scrambling to understand the implications of this alarming development.
The CPI, a key indicator of inflation, revealed an unexpected surge in prices, catching many off guard. This revelation sparked concerns about the potential impact on consumer spending and corporate profits. Investors quickly reacted by selling off their stocks, leading to a sharp decline in market values.
Regional market watchers were paying close attention to the outcome of the presidential election in Indonesia, one of Southeast Asia’s biggest economies and a supplier of strategically important resources like nickel.
Hong Kong’s Hang Seng index resumed trading after the Lunar New Year holiday, edging 0.2% higher to 15,769.95 after opening lower. Markets in mainland China remain closed all week.
Core prices, which exclude volatile food and energy components, rose 0.4% month over month and 3.9% from a year ago. Core CPI was expected to have increased 0.3% in January and 3.7% from a year earlier, respectively.
“This may well come as an easy excuse to take some of the froth out of the top of this market that’s been universally higher thus far this year,” said Art Hogan, chief market strategist at B. Riley Financial. “The CPI was, as reported today, just a touch hotter than expectations and proof positive that we’re not on a linear path, but we’re on a path headed lower.”
Stocks slid Tuesday after consumer inflation data came in hotter than expected. The Dow Jones Industrial Average had its worst day since March 2023, but the index is still up for the year.
The 10-year yield rose to 4.315%.
The consumer price index climbed 3.1% year over year in January, according to data released Tuesday by the Bureau of Labor Statistics. That is down from the 3.4% pace set in December, which was a slight reacceleration from the previous month.
As for the main indexes, the Dow Jones Industrial Average slumped 1.4% to 38,272 and the S&P 500 fell 1.4% to 4,953. The rate-sensitive Nasdaq Composite performed the worst of the three, spiraling 1.8% to 15,655 as the yields on the 2-year and 10-year Treasury bonds jumped to levels not seen since mid-December.
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