Nasdaq 100, Dow Jones, S&P 500 News: Inflation Shock Hits Wall Street Hard

Wall Street Reacts to Inflation Data

Wall Street witnessed a significant downturn on Wednesday, triggered by unexpectedly high inflation figures. These statistics cast doubt on the Federal Reserve’s potential monetary easing plans.

At 14:34 GMT, the Dow Jones Industrial Average is trading 38539.84, down 343.83 or -0.88%. The S&P 500 Index is at 5171.09, down 38.82 or -0.75% and the Nasdaq Composite is trading 16177.01, down 129.53 or -0.79%.

Unexpected Inflation Surge

The Labor Department’s report was a key factor in the market’s reaction. March’s Consumer Price Index (CPI) saw a 0.4% rise, surpassing the 0.3% forecast by economists. This increase points to an annual inflation rate of 3.5%, slightly higher than the anticipated 3.4%. Core inflation, which excludes volatile items like food and energy, also exceeded expectations, both monthly and annually.

Market Impact and Fed’s Policy Outlook

The data represents signs of persistent inflation, suggesting that the Fed might reduce rate cuts or avoid them entirely in 2024. The 10-year Treasury yield surged to 4.4806%, a peak since the previous November, indicating market expectations of prolonged higher interest rates. The CPI report led to a decline in the probability of a Fed rate cut in June, now pegged at around 21% compared to 56% previously.

Sector Performance and Individual Stock Movements

All S&P 500 sectors experienced declines, with real estate being the hardest hit. However, there were some positive notes in the market. Delta Air Lines and Alibaba’s U.S.-listed shares saw gains due to strong travel demand and restructuring support, respectively.

Upcoming Data and Earnings Reports

Investors are now awaiting the March producer price index and insights from the Fed’s latest meeting minutes. Additionally, the first-quarter earnings season is gaining momentum with major banks like JPMorgan Chase, Citigroup, and Wells Fargo set to report soon.

Market Forecast: Bearish Short-Term Outlook

Given the surprise inflation data and its potential impact on the Fed’s rate decisions, the short-term market outlook appears bearish. Investors might brace for more cautious trading, monitoring upcoming data and earnings reports for further direction.

Technical Analysis

E-mini S&P 500 Index futures are down on Wednesday but well off its low for the session. The price action suggests new buyers came into the market as it approached the 50-day moving average at 5169.67, stopping at 5176.50.

The 50-day MA has been controlling the market since November 10. So crossing to the weak side of this trend indicator could signal a significant shift in investor sentiment, while leading to an acceleration to the downside.