US stocks opened with steep declines Tuesday, battered by an ugly inflation report that all but confirmed continued aggressive Federal Reserve interest rate hikes.
While the annual increase in the consumer price index (CPI) slowed slightly in August to 8.3 percent, inflation actually rose 0.1 percent over the month compared to July, the Labor Department said, a disappointing result amid widespread expectations that CPI would fall in the month.
More concerning, the report showed that excluding volatile food and energy prices, “core” CPI accdataelerated sharply in August, and rose 6.3 percent over the past 12 months, after the 5.9 percent pace seen in July and June.
Investors had been clinging to hopes that slowing price increases would allow the Federal Reserve to eventually pull back on its tough anti-inflation fight. But despite falling gasoline prices, food, housing and medical care costs continue to rise.
Economists say the data end hopes the Fed next week might opt for a smaller interest rate increase, rather than a third consecutive three-quarter point hike.
Briefing.com analyst Patrick J O’Hare said the “hotter than expected” inflation data “put a chill on some of the peak inflation/peak hawkishness/soft landing chatter.”
About 20 minutes into the trading session, the Dow Jones Industrial Average dropped 1.7 percent to 31,845.13.
The broad-based S&P 500 fell 2.2 percent to 4,022.19, while the tech-rich Nasdaq Composite Index sunk 3.0 percent to 11,897.81
“Nasty reaction to a nasty CPI report,” O’Hare said.
Among individual companies, Twitter shares were down 1.1 percent ahead of a shareholder vote on a takeover by billionaire investor Elon Musk, who is trying to pull out of the deal.
Twitter’s ex-security chief Peiter “Mudge” Zatko is also testifying Tuesday before a US Senate committee looking into whether security practices at the social network were dangerously lax.
