NEW YORK, Feb 11 — Wall Street ended sharply lower on Thursday after US consumer prices data came in hotter than expected and subsequent comments from a Federal Reserve official raised fears the US central bank will hike rates aggressively to fight inflation.
US Labour Department data showed consumer prices surged 7.5 per cent last month on a year-over-year basis, topping economists’ estimates of 7.3 per cent and marking the biggest annual increase in inflation in 40 years.
US stocks fell further after St. Louis Federal Reserve Bank President James Bullard said the data had made him “dramatically” more hawkish. Bullard, a voting member of the Fed’s rate-setting committee this year, said he now wanted a full percentage point of interest rate hikes by July 1.
“Inflation tends to be kryptonite to valuations. Higher inflation causes multiples to compress, and that’s what we’re experiencing right now,” said Terry Sandven, chief equity strategist at US Bank Wealth Management in Minneapolis.
“Volatility is likely to remain until in the number and magnitude of Fed rate hikes is better known.”
Within minutes of Bullard comments, rate futures contracts were fully pricing an increase in the Fed’s target range for its policy rate to 1 per cent-1.25 per cent by the end of its policy meeting in June, with some bets on an even steeper rate hike path.
Megacap growth stocks Tesla Inc, Nvidia and Microsoft sold off.
According to preliminary data, the S&P 500 lost 83.13 points, or 1.81 per cent, to end at 4,504.05 points, while the Nasdaq Composite lost 304.73 points, or 2.10 per cent, to 14,185.64. The Dow Jones Industrial Average fell 526.33 points, or 1.47 per cent, to 35,241.69.
The S&P 500 is now down about 5 per cent in 2022, and the Nasdaq is down about 9 per cent.
All of the 11 S&P 500 sector indexes declined, with technology and real estate leading the way lower.
Meanwhile, US companies continued to report upbeat quarterly results. With 78 per cent of the S&P 500 companies that have reported results beating analysts’ profit estimates, according to Refinitiv data.
Walt Disney Co rose after beating revenue and profit estimates on strong subscriber additions and attendance at US theme parks.
Barbie maker Mattel Inc and cereal maker Kellogg Co both gained after forecasting full-year profits above market expectations. — Reuters