New York : Wall Street fell for a second straight day on Wednesday from a record-setting streak as investors again feared the Federal Reserve would hike interest rates faster than it says due to runaway inflation in the United States.
The Labor Department reported that the US Consumer Price Index, which represents a basket of products ranging from gasoline and health care to groceries and rents, rose 6.2% during the year to October.
It was the fastest annual expansion of the so-called CPI since November 1990 and it drove the three major US equity indexes – the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite – down by an average of 1% each. It was a second day in the red for the indexes which prior to Tuesday hit record highs non-stop for about a week or more.
“This inflation report has many economists bracing for another hot report next month as price increases with rents and autos show no signs of easing,” Ed Moya, analyst at online trading platform OANDA, said. He added that the dollar and US Treasury yields rallied instead on Wednesday on “the argument that the Fed might be making a policy mistake.”
The plunge on Wall Street was led by the tech-heavy Nasdaq. The index, which groups Big Tech names such as Facebook, Amazon, Apple, Netflix and Google, closed down 96 points, or 0.6%, at 15,623. Nasdaq slipped 0.6% in the previous session. Prior to that, it rose 6% during an 11-day stretch, where it mostly hit record highs. Despite Wednesday’s drop, Nasdaq remains up 21% on the year.
The S&P 500, which represents the top 500 US stocks, settled down 38 points, or 0.8%, at 4,647. The index fell 0.6% on Tuesday after rising 3% in eight days prior, during which it repeatedly hit all-time highs. The S&P 500 remains up 24% on the year.
The Dow, a blue-chip index which groups mostly industrial stocks, finished down 240 points, or 0.7%, at 36,080. It fell 0.3% in the prior session after a near 2% gain earlier over an eight-day stretch, where it hit a previously unseen peak of 36,566. The Dow remains up 18% on the year.
Despite soaring inflation, the Fed has held off from raising interest rates, which the central bank has kept at between zero and 0.25% since the first major US outbreak of the coronavirus in March 2020. As late as last week, Chairman Jerome Powell told reporters that the Fed will be “patient” in executing its first post-pandemic rate hike, which would most likely fall at the end of next year.
Powell’s assurances notwithstanding, markets have constantly speculated that the Federal Reserve’s hand might be forced faster than it expects on a rate increase. President Joe Biden added to those fears on Wednesday when he vowed upon the release of the October CPI data to make the fight against inflation his “top priority.”