Hotter-Than-Expected Inflation Data Leads To Sell-Off On Wall Street

Largely reflecting a negative reaction to hotter-than-expected U.S. inflation data, stocks have moved sharply lower during trading on Tuesday. The major averages have all shown significant moves to the downside, with the Dow pulling back well off yesterday’s record highs.

The major averages have climbed off their worst levels in recent trading but remain firmly negative. The Dow is down 462.33 points or 1.2 percent at 38,335.05, the Nasdaq is down 215.84 points or 1.4 percent at 15,726.71 and the S&P 500 is down 59.56 points or 1.2 percent at 4,962.28.

The sell-off on Wall Street comes following the release of a highly anticipated Labor Department report showing consumer prices in the U.S. increased by slightly more than expected in the month of January.

The Labor Department said its consumer price index rose by 0.3 percent in January after inching up by 0.2 percent in December. Economists had expected consumer prices to edge up by 0.2 percent.

While the report also showed the annual rate of consumer price growth slowed to 3.1 percent in January from 3.4 percent in December, economists had expected the pace of growth to slow to 2.9 percent.

Excluding food and energy prices, core consumer prices climbed by 0.4 percent in January after rising by 0.3 percent in December. Core prices were expected to increase by 0.3 percent.

The annual rate of core consumer price in January came in unchanged from the previous month at 3.9 percent. The pace of core price growth was expected to decelerate to 3.7 percent.

With Federal Reserve officials repeatedly saying they need more “confidence” inflation is slowing before lowering interest rates, the data has further reduced optimism about a near-term rate cut.

CME Group’s FedWatch Tool is currently indicating just an 8.5 percent chance of a quarter point rate cut in March, while the chances of a quarter point rate cut in early May have fallen to 37.6 percent.

Quincy Krosby, Chief Global Strategist for LPL Financial, called the report a…