Key points:

  • All three major U.S. stock market indexes fell amid higher inflation data.
  • The Dow Jones decline was the biggest one-day percentage drop in nearly 11 months.
  • Investor expectations for a rate cut in May fell from 58% to 36.1%.

On Tuesday, the primary indices on Wall Street experienced a decline following inflation data that exceeded expectations, sidelining anticipations of an imminent interest rate reduction. Consequently, there was a notable uptick in the yields of US Treasury bonds.

The S&P 500 recorded a loss of 68.14 points, equivalent to 1.37%, settling at 4,953.70 upon closure. Simultaneously, the Nasdaq Composite Index witnessed a decline of 282.64 points, representing a 1.79% decrease, concluding at 15,659.91. The Dow Jones Industrial Average saw a decrease of 522.05 points, or 1.36%, ending the day at 38,275.33.

This marked the most substantial one-day percentage decline for the Dow Jones Industrial Average in nearly 11 months.

Investors’ expectations meet reality

Throughout this year, market optimism has been fueled by expectations that the Federal Reserve would initiate rate cuts starting in May. On Friday, the S&P 500 achieved a historic milestone by closing above 5,000 points. The Dow also approached its all-time high, and on Monday, the Nasdaq momentarily surpassed its previous closing record set in November 2021.

However, following the release of inflation data, traders’ optimism regarding a potential rate cut in May declined from approximately 58% to 36.1%, according to CME’s FedWatch tool. Meanwhile, expectations for a rate cut in June increased to 74.3%.

Stocks mostly fell, but some companies rose

As we mentioned earlier, the Magnificent Seven companies demonstrated sensitivity to economic indicators. Microsoft, Alphabet,, and Meta Platforms experienced declines ranging from 1.6% to 2.2%, attributed to a general increase in U.S. Treasury yields, reaching a two-month high.

In the technology sector, the majority of chipmaker stocks, including Micron Technology, Qualcomm, and Broadcom, saw decreases, causing the Philadelphia SE Semiconductor Index to drop by 2%.

Conversely, among the notable gainers, JetBlue Airways shares surged by 21.6% following investor Carl Icahn’s disclosure of his 9.91% stake in the company. Additionally, Tripadvisor shares rose by 13.8% as the online travel agency established a special committee to assess various deal proposals.