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Crater for stocks after higher-than-expected CPI

  • Stocks slumped on Tuesday after the hotter-than-expected August inflation report.
  • The CPI for August showed that inflation increased 8.3% compared to the same month last year.
  • The new data indicates that the Federal Reserve is likely to make more unconscionable rate hikes.

US stocks slumped on Tuesday after the hotter-than-expected August inflation report. The Dow Jones Industrial Average fell more than 1,200 points to mark its worst day since June 2020.

August’s CPI revealed that inflation rose 8.3%, compared to the same month in 2021. That’s lower than July’s 8.5% but higher than the 8.1% expected. The hot reading comes despite falling gasoline prices.

The core CPI, which does not include volatile food and energy prices, rose 6.3% compared to August last year.

The CPI reading for July was 8.5% and 9.1% in June, which was the highest level in four decades.

“One thing became clear after today’s report: Treasury Secretary Yellen clearly couldn’t take a look at the data,” said Michael Reinking, senior market strategist at the New York Stock Exchange. “Today’s data was disappointing, especially regarding core inflation, which showed gains across the board across all components.”

Tuesday’s session marked the seventh daily declines of 4% or more so far this year. There were zero in 2021 and 10 in 2020, according to Tailor-made investment group.

Here is where the US indices were when the market closed at 4:00 p.m. on Tuesday:

Bridgewater’s co-chief investment officer said the US is at the center of a global financial bubble and warned of a devastating recession looming.

JPMorgan’s Marko Kolanovic said now is the time to buy stocks as inflation will take care of itself and the global economy will avoid a recession.

The US is bracing for rail strikes, but according to Goldman Sachs, markets shouldn’t see that as a “black swan” event, given that the labor market is extremely tight.

European ministers are scheduled for an emergency meeting this month to discuss cutting energy costs across the EU. European Commission President Ursula von der Leyen is expected to unveil proposals aimed at reducing high prices on Wednesday, Reuters reported.

Asian utilities are stockpiling fuel oil as natural gas shortages have fueled demand for dirtier energy alternatives. In August, Japan’s fuel oil purchases hit a four-year high, for example.

Meanwhile, Saudi Arabia’s sovereign wealth fund added a $412 million bet on tourism as it took a 30% stake in Almosafer Travel & Tourism.

Oil prices fell, with West Texas Intermediate falling 0.11% to $87.68 a barrel. Brent crude, the international benchmark, fell 0.49% to $93.53 a barrel. Crude prices could find a floor around $80 a barrel as the Biden administration reportedly considers buying oil to replenish the Strategic Petroleum Reserve.

Gold fell 1.57% to 1,713.30 an ounce. The 10-year yield rose 0.58 basis points to 3.422%.

Bitcoin fell 9.71% to $20,237.73.


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