Inflation Rises Beyond Expectations, Stocks Tumble

Stocks in the US experienced huge selling pressure on Tuesday following the publication of the awaited inflation figures for August. The report revealed that prices were stronger than expected last month.

Stocks Began to Fall

Almost immediately after the inflation report was released, Nasdaq shares dropped by about 1.8% while S&P 500 lost 1.2%, and Dow Jones declined by 0.9%. The report was made public by the Bureau of Labor and showed further that the August consumer price index has commodity prices rising by 8.3% more than what was delivered in the same period in 2021, and it was 0.1% higher than the July figures.

Economists had a bet that the August figure will come in at an 8.1% inflation increase against 2021 and a 0.1% decline over July. The latest report makes the second consecutive price moderation from the 40-year high levels reached in 2021. Investors are now expecting that the Federal Reserve would increase interest rates by 75 basis points at its next meeting scheduled to hold next week.

The market has been expecting that the Federal Reserve would implement the third 75 basis points rate increase due to hawkish comments from the Reserve’s top officials. The report released on Tuesday has probably been sealed.

All Clear for the Feds

The Managing Director in charge of Trades at Morgan Stanley, Chris Larkin, said that the inflation reading for July which came in with a mild touch must have instigated the feeling that the Feds would be soft on rates. However, the Chairman of the Federal Reserve, Jerome Powell, already made it clear that the rate increment will not stop till inflation is completely curbed.

Larkin said now that the market’s expectation around the Fed’s policy has been moderated, investors can now give their attention to market challenges. He said such changes include the obstacles presented by a strong Dollar and the extremely high earnings.

Peloton gained central attention in the early trading hours of Tuesday following the announcement on Monday that the company’s co-founder, John Foley, was stepping down from the directors’ board. This comes some months after the company hired Barry McCarthy to become CEO. 

Rent the Runway’s shares dropped by almost 25% on Tuesday following the company’s cutting down of its annual guidance and further announcement to reduce its staff strength by 24%.   

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