U.S. Stocks Move Sharply Lower On Hotter-Than-Expected Inflation Data

Stocks moved sharply lower during trading on Tuesday, with the major averages all showing significant moves to the downside after ending Monday’s trading narrowly mixed. The Dow pulled back well off yesterday’s record closing highs.

The major averages climbed off their worst levels going into the close but still posted steep losses on the day. The Dow tumbled 524.63 points or 1.4 percent to 38,272.75, the Nasdaq plunged 286.95 points or 1.8 percent to 15,655.60 and the S&P 500 slumped 68.67 points or 1.4 percent to 4,953.17.

The sell-off on Wall Street came 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 33.5 percent.

Quincy Krosby, Chief Global Strategist for LPL Financial, called the report a “disappointment for those who…