US stock market recovered on Wednesday following the biggest sell-off on Wall Street since June 2020, as hotter-than-expected inflation data fueled expectations of the Federal Reserve raising interest rates more aggressively.
Stock Market Movement
By mid-afternoon in New York, the broad S&P 500 and the technology-heavy Nasdaq (NASDAQ:NDAQ) Composite were up 0.1 and 0.4 %, respectively. Following advances in the previous session, the dollar fell 0.2% versus a basket of six other currencies.
These stock market swings occurred after the S&P 500 fell 4.3% on Tuesday, the most since the early days of the coronavirus epidemic, on the basis of higher-than-expected August inflation data. The Nasdaq (NASDAQ:NDAQ) finished 5.2% down.
Official statistics indicated that consumer prices in the world’s biggest economy grew 0.1% in August from the previous month, contrasting with predictions for a 0.1% fall. The annual rate was 8.3 %, down from 8.5% in July but higher than experts’ expectations of 8.1%
The inflation data increased investors’ expectations of how aggressively the Fed would boost borrowing costs, with futures markets now pricing in a more than one-in-three likelihood that the US central bank would hike rates by a full percentage point this month. A hike of this size would come after two straight 0.75% point rises.
Stock Market analysts now estimate the Fed’s main interest rate to peak at about 4.3% in March 2023, a 0.3% point hike from Monday.
“Two historically large hikes this summer appear to have had a weaker immediate impact on the inflationary landscape than expected, leading markets to believe the Fed may be forced to make the hike of the century,” said JPMorgan strategists.
US government bonds were also firmer on Wednesday, despite the fact that the yield on the policy-sensitive two-year Treasury Note had risen sharply the previous session to its highest level since October 2007. The yield rose 0.02% point to 3.78% on Wednesday as the price of the debt product fell.
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Author Okoro Chinedu 