By Jerry Kronenberg | Moomoo News
The $Dow Jones Industrial Average (.DJI.US)$ fell more than 400 points Wednesday, while the $S&P 500 Index (.SPX.US)$ and $Nasdaq Composite Index (.IXIC.US)$ sank nearly 1% after a stronger-than-expected March inflation report dampened hopes for Federal Reserve interest-rate cuts.
The Dow shed 422.16 points (1.1%) to a 38,461.51 close, while S&P 500 gave up 49.27 ticks (1%) to 5,160.61 and the $Nasdaq Composite Index (.IXIC.US)$ dropped 136.28 points (0.9%) to 16,170.36.
The broad indexes fell after the U.S. Labor Department reported before the bell that the March Consumer Price Index – which measures retail inflation – rose 3.5% year over year. That’s hotter than the 3.4% that economists Dow Jones surveyed had expected.
Core CPI, which excluded volatile food and energy prices, likewise gained 3.8% year on year – exceeding the 3.7% consensus that analysts had forecast.
The hotter readings cut back market hopes for reductions in the Fed’s benchmark Federal Funds rate.
Many market watchers had been hoping the Fed would cut rates early and often in 2024, but the CME FedWatch tool showed only a 16.4% probability as of Wednesday that the central bank will cut the Fed Funds rate at its June meeting.
Meanwhile, Goldman Sachs analysts scaled back their projections of three quarter-point rate cuts this year to just two, while Barclay's now only expects one.
Falling interest rates historically help stocks by making bond and money-market yields less attractive to investors.
However, the higher inflation reading -- along with hawkish minutes released Wednesday from the FOMC's March meeting -- sent the $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ rising 18.2 basis points to 4.548%.
Conversely, the prospect of “higher for longer” interest rates sent many stocks lower – particularly in the real-estate sector, which historically favors lower mortgage rates.
For example, mortgage firm $Rocket (RKT.US)$ shed 12.8% to $12.30, while home-selling platform $Opendoor Technologies (OPEN.US)$ sank 10.6% to $2.45.