The trading session on Wednesday kicked off with a notable downturn on Wall Street, following the release of inflation data for March that exceeded expectations. The unexpected spike in inflation figures has cast doubt on the likelihood of near-term interest rate cuts, prompting a negative sentiment among investors.
According to the much-anticipated data, US consumer prices saw a significant uptick of 0.4 percent in March, surpassing initial forecasts. This surge translated into a notable 3.5 percent annual consumer price index, further fueling concerns about inflationary pressures in the economy.
Within the first 10 minutes of trading, the Dow Jones Industrial Average witnessed a sharp decline of 1.2 percent, sliding to 38,404.60. Similarly, the broad-based S&P 500 registered a notable drop of 1.1 percent, settling at 5,154.14, while the tech-heavy Nasdaq Composite Index dipped by 1.0 percent to 16,146.74.
The surge in US Treasury bond yields immediately following the release of the inflation data reflected the market’s anticipation of a potential delay in Federal Reserve interest rate cuts. Analysts suggested that the Fed might consider pushing back rate cuts to later in 2024 or even into 2025, given the persistent inflationary pressures.
“Inflation is now on the rise. How can the Fed justify rate cuts amidst increasing inflation?” questioned Adam Sarhan, a strategist at 50 Park Investments. He further noted, “The mere prospect of a rate cut in 2024 seems uncertain, if not entirely improbable.” However, Sarhan added that despite this uncertainty, the market could still witness upward momentum in 2024 if the economy continues to demonstrate resilience and strength.
Amidst the broader market downturn, certain individual companies managed to defy the trend. Notably, Delta Air Lines saw a significant uptick of 3.8 percent after reporting better-than-expected earnings and projecting a record-breaking second quarter. The airline attributed its optimistic outlook to the sustained robust demand for air travel, indicating a potential bright spot amidst the overall market volatility.