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US stocks slump after stronger than expected CPI; Fed cuts in doubt

Published 2024/04/10, 01:58
Updated 2024/04/10, 15:36
© Reuters

Investing.com -- U.S. stocks fell sharply Wednesday, after consumer prices grew more than expected in March, raising the possibility of the Federal Reserve delaying the start of its expected rate-cutting cycle until later in the year.

At 09:35 ET (13:35 GMT), the Dow Jones Industrial Average fell 360 points, or 0.9%, S&P 500 slumped 65 points, or 1.2%, and NASDAQ Composite dropped 197 points, or 1.2%.

Strong CPI data could delay rate cuts

Data released earlier Wednesday showed that the annualized reading of the closely-watched consumer price index increased by 3.5% last month, a sharp jump from 3.2% notched in February, and more than the 3.4% expected. The year-on-year core figure, which strips out volatile items like food and fuel, stayed elevated at 3.8%, considerably above the Fed's 2% medium-term target..

Fed officials have made easing inflation the major objective of a series of interest rate hikes that have brought borrowing costs up to more than two-decade highs.

They projected, at the last meeting in March, that the central bank would agree to 75 basis points of cuts this year, but have stressed that they first need to see more evidence that price growth is sustainably easing back down to their 2% annualized target.

This inflation reading provides the Fed with little impetus to begin cutting interest rates at time soon, especially after Friday's red-hot labor report.

Several Fed policymakers have warned in recent weeks that sticky inflation gives the central bank more headroom to keep rates higher for longer.

Yields on the rate-sensitive 2-year Treasury bond and the benchmark 10-year note, which typically move inversely to prices, climbed sharply Wednesday.

The minutes of the Fed’s March meeting are due out later Wednesday, and are expected to offer more insight into the bank’s plans to cut interest rates this year.

Delta leads off new earnings season

The quarterly earnings season has arrived, with Delta Air Lines (NYSE:DAL) stock rising 1.4% after the carrier offered up an upbeat outlook for the current quarter after its first-quarter earnings topped estimates on buoyant travel demand.

Taiwan Semiconductor Manufacturing (NYSE:TSM) stock rose 0.3% after the world’s biggest chipmaker said that its sales in March jumped sharply, likely benefiting from increased demand for chips from the artificial intelligence industry.

Market darling NVIDIA Corporation (NASDAQ:NVDA) slid 1.5%, hitting a one-month low, as cooling hype over artificial intelligence saw traders lock-in profits after a stellar run in the stock.

Wall Street banks JPMorgan Chase & Co (NYSE:JPM), Citigroup Inc (NYSE:C) and Wells Fargo & Company (NYSE:WFC) will kick off the earnings season in earnest on Friday.

(Ambar Warrick and Noreen Burke contributed reporting)

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