A hotter-than-expected CPI report resulted in a quick reversal in stock futures Tuesday morning. Dow futures, which were up more than 200 points shortly before 8:30 a.m. EDT, were down more 300 points following the release. Nasdaq 100 futures saw a negative swing of nearly 3%.
The Labor Department said Tuesday that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 8.3% in August from a year ago. Prices climbed 0.1% in the one-month period from July.
Those figures were both higher than the 8.1% headline figure and 0.1% monthly decline forecast by Refinitiv economists, likely a worrisome sign for the Federal Reserve as it seeks to cool price gains and tame consumer demand.
Scorching-hot inflation has created severe financial pressures for most U.S. households, which are forced to pay more everyday necessities like food and rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily impacted by price fluctuations.
The consumer price index, which tracks a broad swath of goods and services, increased 0.1% for the month and 8.3% over the past year.
Economists had been expecting headline inflation to fall 0.1% and core to increase 0.3%, according to Dow Jones estimates. The respective year-over-year estimates were for 8% and 6% gains.
The food index increased 0.8% in August and shelter costs, which make up about one-third of the weighting in the CPI, jumped 0.7% and are up 6.2% from a year ago.
Markets slumped following the news, with futures tied to the Dow Jones Industrial Average down nearly 350 points after being higher earlier.
MacDailyNews Take: Apple (AAPL) shares are currently down $3.40 (-2.08%) to $160.03 in pre-market trading.
In January, Interactive Brokers founder Thomas Peterffy said, “1% or 2% [in interest rate hikes] doesn’t mean anything. If they really wanted to stop inflation, they would have to raise rates to 4%, 5%, 6%.”
The Fed’s current target interest rate range is 2.25% to 2.50%.
‘Tis best to get a handle on inflation, if you know how, while you still can. – MacDailyNews, May 11, 2021
Stop the misguided crusade against domestic energy production and profligate federal spending and inflation will be stopped dead in its tracks. It’s not difficult. – MacDailyNews, May 11, 2022
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