Wall St ends sharply lower as hot inflation sparks sell-off
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[February 14, 2024] By
Johann M Cherian, Ankika Biswas and Carolina Mandl
(Reuters) -Wall Street's main indexes tumbled on Tuesday after a
higher-than-expected consumer inflation reading pushed back market
expectations of imminent interest rate cuts, driving U.S. Treasury
yields higher.
The Dow Jones Industrial Average posted its biggest one-day percentage
drop in nearly 11 months, after a Labor Department report showed U.S.
consumer prices increased above forecasts in January amid a surge in the
cost of shelter.
"Equities are in retreat mode following a still inflationary CPI
report," said Terry Sandven, chief equity strategist at U.S. Bank Wealth
Management. "The higher for longer inflation is a setback for the
Federal Reserve."
Markets have rallied this year on bets that the Fed would start trimming
rates in May. The S&P 500 closed above 5,000 for the first time on
Friday. The Dow is also trading near a record-high level, and on Monday
the Nasdaq briefly surpassed its record closing high from November 2021.
After the release of the inflation data, bets by traders for a rate
reduction in May of at least 25 basis points dropped to 36.1%, from
about 58% before the data, while expectations for June stood at 74.3%,
the CME FedWatch tool showed.

Rate-sensitive megacaps like Microsoft, Alphabet, Amazon.com and Meta
Platforms fell between 1.6% and 2.2%, as yields on U.S. Treasury notes
across the board spiked to two-month highs. [US/]
Most chip stocks such as Micron Technology, Qualcomm and Broadcom also
dropped, sending the Philadelphia SE Semiconductor index down 2%.
Real estate, consumer discretionary and utilities led losses among the
11 major S&P 500 sector indexes, with real estate falling to a low of
more than two months.
The small-cap Russell 2000 index also fell 4.3%, the biggest one-day
drop since June 16, 2022.
"Many Federal Reserve governors have come out in the last couple of
weeks and given various indications that the cuts expected by the market
in the first half of the year may have been premature. Now the CPI data
are certainly reaffirming that picture," said Bob Elliott, chief
investment officer at Unlimited Funds.
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Traders work on the floor at the New York Stock Exchange (NYSE) in
New York City, U.S., February 12, 2024. REUTERS/Brendan McDermid

The latest data comes on the heels of a modest revision to inflation
in the last quarter of 2023 that left investors briefly relieved on
the trajectory of inflation.
The Cboe volatility index, a market fear gauge, hit its highest
level since November.
The S&P 500 lost 68.14 points, or 1.37%, to end at 4,953.70 points,
while the Nasdaq Composite lost 282.64 points, or 1.79%, to
15,659.91. The Dow Jones Industrial Average fell 522.05 points, or
1.36%, to 38,275.33.
It marked Dow's biggest one-day percentage loss since March 22,
2023.
Among top movers, JetBlue Airways soared 21.6% after activist
investor Carl Icahn reported a 9.91% stake, adding that the
carrier's stock is "undervalued."
Arista Networks shares fell 5.5% after the cloud solutions provider
forecast current-quarter adjusted gross margin below expectations,
while Marriott International lost ground after the hotel operator
forecast annual profit below Street expectations.
Shares of software firm Cadence Design Systems dropped 4% following
a bleak quarterly sales forecast, while toymaker Hasbro lost after a
steeper-than-expected drop in holiday-quarter sales and profit.
Tripadvisor stock jumped 13.8% as the online travel agency formed a
special committee to evaluate deal proposals.
Declining issues outnumbered advancers by a 10-to-1 ratio on the
NYSE and a 4.9-to-1 ratio on the Nasdaq.
On U.S. exchanges 12.9 billion shares changed hands compared with
the 11.71 billion moving average for the last 20 sessions.
(Reporting by Carolina Mandl in New York and Johann M Cherian and
Ankika Biswas in BengaluruAdditional reporting by Medha Singh
Editing by Maju Samuel and Matthew Lewis)
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