New York Stock Exchange benchmarks fell as investors reactedwhich became risk-averse after stronger-than-expected inflation data extinguished hopes that the Federal Reserve will begin its monetary easing cycle in June.
US consumer prices rose more than expected in Marchas Americans paid more for gasoline and home rent, leading financial markets to assume that the Reserve would possibly begin cutting interest rates as soon as September.
The Consumer Price Index (CPI) rose 0.4% monthly in March. Annually it increased 3.5%, compared to an estimated growth of 3.4%.
Excluding the volatile food and energy components, the underlying figure rose 0.4% month-on-month in March. Annually, it gained 3.8%, compared to the estimated increase of 3.7%.
Traders as well as broader markets sharply reduced bets that the Federal Reserve would cut interest rates in June after the CPI report.
Government bond yields soared after the data was released, with the 10-year bond rising again to 4.5008%, its highest level since last November.
Minutes from the Federal Reserve’s March meeting, at which it stuck to its guidance of three rate cuts this year, will be released later and could be crucial in assessing the central bank’s stance on policy easing.
All 11 sectors of the S&P 500 were trading lower. The real estate sector, which led the declines, fell 4.0% and was heading for its worst single-day drop since June 2022.
Other rate-sensitive sectors, such as utilities, fell 1.8%, while the Russell 2000 small-cap index lost 2.4%.
Most mega-cap growth stocks fell, but artificial intelligence giant Nvidia bucked the trend and rose 1.4%.
Among individual stocks, Alibaba’s U.S.-listed shares gained 1.3% after the company’s co-founder, Jack Ma, wrote a lengthy memo to employees on Tuesday, expressing support for “the efforts of restructuring of the Internet giant”, a measure that is not customary for the billionaire who has spent recent years away from the markets.
For its part, The president of the United States, Joe Biden, acknowledged this Wednesday that interest rate cuts may be delayed after the inflation rate in the country rose again in March by three tenths, to 3.5%.
“This may delay interest rate cuts for a month or so. We don’t know what the (Fed) is going to do,” Biden said during a joint press conference with Japanese Prime Minister Fumio Kishida.
Biden, however, assured that he still thinks that the Reserve will make reductions “before the end of the year.”
Despite today’s data, the American president indicated that he reduced inflation from 9% when he came to power in 2021 to around 3% today.
In this context the Dow Jones index Industriales ended at 38,461.51 points, losing 1.09%. the S&P500 stood at 5160.64 points, dropping 0.95% and the Nasdaq Composite Depreciating 0.84%, it reached 16170.36 points.
Source: Ambito
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