Stocks experienced a significant downturn on Wednesday, effectively erasing gains from the previous two sessions. With this decline, the Dow reached its lowest intraday level in nearly a month.
As it stands, the major averages are hovering just above their session lows. The Dow has dropped 702.12 points, or 1.7%, to 40,034.84. The Nasdaq is down 211.98 points, or 1.3%, to 16,813.90, and the S&P 500 has fallen 84.97 points, or 1.6%, to 5,410.55.
The sell-off on Wall Street followed the Labor Department's report on consumer price inflation for August. While overall consumer prices aligned with economist predictions, core consumer prices increased more than expected.
The Labor Department reported a 0.2% rise in the consumer price index for August, matching both July's uptick and economists' forecasts. However, core consumer prices, which exclude volatile food and energy costs, climbed by 0.3% after a 0.2% increase in July. Economists had anticipated another 0.2% rise.
Despite these numbers, the Federal Reserve is still likely to cut interest rates next week. Yet, the higher-than-expected rise in core prices makes a substantial 50-basis-point cut less probable. According to CME Group's FedWatch Tool, there's an 83% likelihood of a quarter-point rate cut, compared to a 17% chance of a half-point cut.
Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, remarked, "Some might be disappointed that inflation wasn't lower than expected, which could have given the Fed more leeway for a 50 bps cut." He added, "But most Fed officials have indicated they prefer to start with smaller cuts rather than a significant one."
The report also noted a decrease in the annual consumer price growth rate to 2.5% in August from 2.9% in July, against economist expectations of 2.6%. The annual core consumer price growth remained steady at 3.2%, in line with predictions.
**Sector News**
Housing stocks, sensitive to interest rate changes, fell sharply, leading the Philadelphia Housing Sector Index down by 2.8%. Banking stocks also faced considerable weakness, with the KBW Bank Index dropping 2.7% to its lowest intraday level in almost a month.
Transportation stocks took a hit as well, as reflected by the Dow Jones Transportation Average's 2.4% slump. Brokerage, energy, and retail stocks also trended downward along with most other major sectors.
**Other Markets**
In international markets, Asia-Pacific stocks mostly declined on Wednesday. Japan's Nikkei 225 Index fell by 1.5%, while China's Shanghai Composite Index slid by 0.8%.
European markets also saw declines during the session. The French CAC 40 Index fell by 0.4%, the U.K.'s FTSE 100 Index by 0.3%, and the German DAX Index by 0.1%.
In the bond market, treasuries improved after initial weakness. Consequently, the yield on the benchmark ten-year note, which moves inversely to its price, decreased by 2.4 basis points to 3.620%.
