4/11/2024

Wall Street falls sharply as inflation rises

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US stock indices showed a decline at the end of the trading session. This happened after the publication of inflation data, which turned out to be higher than analysts’ forecasts. Moreover, this information negatively affected investors’ expectations regarding the imminent reduction of interest rates by the Federal Reserve System.

The Dow Jones Industrial Average fell 422.16 points (1.09%) to close at 38,461.51. The S&P 500 index lost 49.27 points (0.95%), reaching 5,160.64. The Nasdaq Composite fell 136.28 points, or 0.84%, to finish at 16,170.36.

Inflation continues to rise

The publication of the US Department of Labor’s report on the consumer price index (CPI), which turned out to be below the consensus forecast, clearly reduced the optimism of investors and traders. The statistics also served as a reminder that the path to the Fed’s 2% inflation target will be long and difficult. The uncertainty caused by the report led investors to sell off shares without waiting for more detailed information.

Minutes from the Fed’s March policy meeting also indicate that progress in reducing inflation may be stalling. In this regard, it may be necessary to maintain contractionary monetary policy for a longer period of time.

Following the report, the likelihood of a 25 basis point Fed rate cut in June fell from 56.0% to 16.5%, according to the FedWatch CME tool.

In the coming days, investors will focus their attention on the producer price report. This figure will provide a more complete picture of inflation in March and will mark the unofficial start of the first-quarter reporting season.

Nvidia shares rose, contrary to the general downward trend

There has been a significant decline in the value of stocks that are sensitive to interest rate fluctuations. In particular, the real estate sector (.SPLRCR) posted its biggest one-day decline since June 2022. Housing-related stocks (.HGX) are also experiencing significant declines not seen since Jan. 23.

Of the 11 major sectors of the S&P 500 index, 10 ended the day with negative dynamics. The sharpest decline is observed in the real estate sector.

Three major banks are expected to report earnings this coming Friday: JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co.

Analysts forecast S&P 500 total earnings for the first quarter to rise 5.0% year-over-year. This figure is lower than the original forecast made on January 1, which called for growth of 7.2%.

Most mega-cap growth stocks were down, with the exception of Nvidia Inc, which posted a 2.0% gain, bucking the trend.

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