U.S. stock indexes opened lower after fresh inflation data showed that price pressures are proving more persistent than investors anticipated, denting hopes that central bankers may ease their course of interest-rate increases.
The S&P 500 tumbled 2.1% Tuesday. The tech-focused Nasdaq Composite plummeted 2.8% and the Dow Jones Industrial Average declined 1.6%.
The U.S. Labor Department’s release of the consumer-price index for August, which showed annual inflation at 8.3% that month, was the last major inflation reading before the Federal Reserve’s meeting next week. Consumer prices rose 8.5% in July from a year earlier, slower than the 9.1% annual increase in June, which was a four-decade high.
The latest figures showed that inflation is easing, but at a slower pace than investors and economists had anticipated. Economists surveyed by The Wall Street Journal had been expecting consumer prices to rise 8% annually in August.
Investors were hoping that officials would consider easing their pace of interest-rate increases if data continues to show inflation moderating. The inflation data seemed to undercut those hopes. After the release, stock futures fell, bond yields rose and the dollar rallied.
“This idea that we’re going to get to a soft landing gets less and less likely if the Fed needs to do more work in order to curtail the inflationary pressures,” said Matt Forester, chief investment officer of Lockwood Advisors at BNY Mellon Pershing.
Food prices have surged as part of a broader pickup in U.S. inflation.