Stocks fell into a deep rout on Tuesday after a key August inflation report cames in hotter-than-expected, crushing market optimism that the Federal Reserve will take less aggressive actions in the near future. The Dow Jones Industrial Average sunk over 1,200 points, while the S&P 500 and Nasdaq Composite fell over 4% and 5%, respectively.
Here's how the market settled on Tuesday:
S&P 500 Index
Dow Jones Industrial Average
Nasdaq Composite Index
Tuesday's drop erased nearly all of the recent rally for stocks, with the S&P 500 fall towards its Sept. 6 close of 3,908; just five stocks in the S&P finished in positive territory at closing bell.
The Bureau of Labor Statistics released the Consumer Price Index (CPI) report for August, showing a higher-than-expected reading for inflation on both an annual and month-to-month basis. Headline inflation rose 0.1% from July to August, despite falling gas prices, and 8.3% year-over-year.
Core CPI, which strips more volatile energy and food prices, rose 6.3% annually in August and 0.3% month-to-month.
The report is one of the last the Fed will see ahead of their September 20-21 meeting. Tuesday's report cemented for most market participants that the central bank is likely to issue its third consecutive 0.75 percentage point interest rate hike in effort to stabilize prices. The unexpectedly high inflation report could also lead the Fed to continue taking more aggressive steps for longer than previously anticipated by investors.
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Looking forward, much of the market's next moves will be dominated by expectations for the Fed's upcoming policy-setting meeting and reactions to those decisions.