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Wall Street closes lower as inflation hits 40-year high, inviting aggressive Fed tightening

Published 03/09/2022, 06:54 AM
Updated 03/10/2022, 07:30 PM
© Reuters. A person walks past the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., March 7, 2022. REUTERS/Andrew Kelly

By Stephen Culp

NEW YORK (Reuters) - Wall Street resumed its slide on Thursday, ending in the red as inflation hit a four-decade high, cementing expectations that the U.S. Federal Reserve would hike key interest rates at the conclusion of next week's monetary policy meeting to prevent the economy from overheating.

Looming uncertainties surrounding Russia's invasion of Ukraine also helped convince market participants to recommence their flight to safety.

While all three major indexes ended in the red, they pared their losses late in the day and closed well above session lows, as the U.S. equities market followed its best day in months on Wednesday by renewing a multi-session sell-off.

"It's more of the same," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, noting that the equity market's daily volatility is "being driven more by geopolitical than economic news."

Consumer prices surged in February to a 7.9% annual growth rate, according to the Labor Department, the hottest reading in forty years.

"The (CPI) print was not far off estimates," Nolte added. "There will be more to come in the next month or two as some of the rising commodity prices get incorporated."

While the market fully expects the central bank to raise the Fed funds target rate by 25 basis points at the conclusion of next week's monetary policy meeting, the CPI data suggested the FOMC could move "more aggressively" to curb inflation in the upcoming year, as promised by Fed Chair Jerome Powell last week.

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"It's still expected the Fed will raise rates four to seven times in the next year or two to curb economic growth," Nolte said, adding that "what complicates this, is the Fed has never raised rates with the yield curve this flat and volatility so high."

"They're trying to increase rates at a time when the market is in turmoil."

The graphic below shows annual core CPI growth, along with other indicators, and how far they have soared above the Fed's average annual inflation target:

Energy prices were the main culprit, with gasoline prices surging 6.6% in a single month, although the report did not reflect the entirety of spiking crude prices in the wake of Russia's actions in Ukraine.

Those actions kept geopolitical jitters at a full boil, with peace talks showing little progress even as a humanitarian crisis unfolds and world oil supply pressures continued to weigh on global markets. (NASDAQ:AMZN) provided one of the day's bright spots, its shares jumping 5.4% after the e-commerce giant announced a 20-for-1 stock split and a $10 billion share buyback.

The Dow Jones Industrial Average fell 112.18 points, or 0.34%, to 33,174.07, the S&P 500 lost 18.36 points, or 0.43%, to 4,259.52 and the Nasdaq Composite dropped 125.58 points, or 0.95%, to 13,129.96.

Six the 11 major sectors in the S&P 500 closed in negative territory with tech suffered the biggest percentage drop, while energy shares saw the largest gain.

The NYSE FANG+ index of market leading tech and tech-adjacent megacaps plunged on the day.

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The NYSE FANG+ index of market leading tech and tech-adjacent megacaps plunged 2.1%.

Goldman Sachs Group Inc (NYSE:GS) became the first major U.S. investment bank to announce it was closing operations in Russia. Its shares dropped 1.1%.

The S&P 500 banking index slid 1.0%.

Oracle Corp (NYSE:ORCL) dipped nearly 6% in after-hours trading after the business software and cloud computing firm posted quarterly results.

Declining issues outnumbered advancing ones on the NYSE by a 1.62-to-1 ratio; on Nasdaq, a 1.72-to-1 ratio favored decliners.

The S&P 500 posted 5 new 52-week highs and 12 new lows; the Nasdaq Composite recorded 28 new highs and 163 new lows.

Volume on U.S. exchanges was 12.50 billion shares, compared with the 13.65 billion average over the last 20 trading days.

Latest comments

The Federal Reserve will have reverse rate hikes in order to save an economy that will head into recession due to inflation. They will choose to let inflation run instead of depression caused by rising rates. Game over buy Gold and wait. There is no way out and most people know it.
Putin's aggressiveness, USA and Europe's recklessness are causing a general disaster. Where are the necessary politicians!!!
In the current supply inflation it is useless to raise interest rates. if anything worse
You can set your watch by it, as the headliner of the magic show hits the stage. Another rabbit out of the hat "in late trade," and US Ponzi Scheme "rallies" away its losses.  Why didn't it plunge yesterday at 2PM during the manufactured "rally" on nothing?  Frightening to think the US working class has their retirement hopes pinned to this criminally manipulated JOKE.
lol. gas? thus will translate to everything and inflation will double at this rate within 90 days
that should be enough. Companies are devalued on the rise or the American economy is collapsing. Pour money into stocks in the economic war! rise like an eagle
Buy physical silver and thank me later ...
A picture tells a thousand works.  All you need to do is compare yesterday's chart against today's chart, and a simple 2-day window will allow you to see what a FRAUDULENT, CRIMINALLY MANIPULATED JOKE this pathetic, so-called "market" really is.
Paranoia will destroy ya.
Rate hikes won't solve the inflation this time. GeoPolitics can solve the problem....
Geo-politics is the form of Putin caused current problem
vix not rising means mkt in green soon...just to trap new bears
mkt will turn green soon
biden this is not your cup of tea plz resign. so much efffort u r putting to uplift crude better concentrate on internal factors. only barking dose not help action is needed😂😂😂😂😂
Bevare a very deep nose dive in the market...
Next CPI print will be 10% The party is just starting!!
typical liberal response to life, every decision fueled by fear and ignorance "oh no, I'll actually have to pay interest on my loans, no more free money, whatever shall I do?" Of course, since most liberals are unemployed, *******off the govt, live with their mommy, and sit around playing games all day, this is what we expect from them
lol sad but true 👍
thats what i've been saying to every business that applied for their PPP loans forgiveness.. bunch of leaches
market wants any dam reason to go down.Why US UK interested in Russia Ukraine issue,They want to Earn from that. Ukraine is going on wrong path,path of self destruction
go live in russia lol
Ups,coronavirus ,inflation Ukraine &inflation again.
yes we are way off shhh don't say a thing you will crash the market.
What is the inflation rate based on the 1980 ‘closer to real’ calculation?
probably around 20%
Feb just raise the interest rate like in 1980, let's reset the world again
Patrick, if that happens, there will be a revolution this time. I bet, a 25bp rate hike and some lies from POW.
 Yes a great reset, where we can buy a house for around 50k usd
how is Ukraine contributing to the 3 Trillion USD which was printed during the pandemic??? THERE IS NOTHING RELATED TO THE WAR causing the inflation
Major shift in geopolitical relationships. Accelerated move from hydrocarbons, making life more expensive
Who is claiming pandemic stimulus $ is related to Russian invasion of Ukraine?
American save the world ha ha ha American circus American junk
Up up in the air and then ouuuiii down agan tomorrow when CPI is coming then up again next week when fed decision is coming, before that down down down. Are we all happy ?
bargain hunting LMFAO!
dollar falls against euro as euro rallies against dollar
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