U.S. main stock indexes fell more than 1% on Thursday after stronger-than-expected inflation data and a fall in weekly jobless claims fed into fears that the Federal Reserve will keep raising interest rates to tame high prices.
A Labor Department report showed producer prices climbed 0.7% in January, more than the estimate for a 0.4% increase, highlighting persistent price pressures despite the tighter monetary policy.
Another set showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, offering more evidence of the economy’s resilience.
“You’re seeing the inflation numbers continue to be higher than expected and not really showing disinflation and now the expectations are that the Fed is likely to take rates higher and be more aggressive going forward,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance at Charlotte, North Carolina.
“You’re also seeing the job market still very strong as well, with claims coming in less than expected.”
After a torrid 2022, the main stock indexes have climbed this year on the back of upbeat earnings and expectations that the U.S. central bank will switch to smaller rate hikes.
However, signs of a resilient economy and an acceleration in January consumer prices have recently raised concerns among traders that the Fed may not hit pause on its hawkish policies anytime soon, with hopes of rate cuts later this year receding further.
The Fed is seen pushing the benchmark rate above the 5% mark by May and keeping it above those levels till the year-end.
At 10:09 a.m. ET, the Dow Jones Industrial Average was down 383.90 points, or 1.12%, at 33,744.15, the S&P 500 was down 46.70 points, or 1.13%, at 4,100.90, and the Nasdaq Composite was down 136.01 points, or 1.13%, at 11,934.59.
All the 11 major S&P 500 sectors posted losses of more than 1%, with the real estate leading the declines.
Adding to the downbeat mood, Cleveland Fed President Loretta Mester said inflation remains too high and noted that she was open to raising rates by more than what her colleagues wanted at the last monetary policy meeting.
Traders will also scrutinize remarks from other Fed officials, including St. Louis Fed President James Bullard, to assess the central bank’s tone on monetary policy.
Shares of high-growth stocks like Tesla, Nvidia, Alphabet and Apple Inc fell between 0.8% and 2.7% as U.S. Treasury yields rose.
Cisco Systems Inc rose 5.1% to hit a nine-month high after the network gear maker raised its full-year earnings forecast.
Roku Inc soared 14.9% after the company forecast first-quarter revenue above Wall Street estimates.
Shopify Inc sank 15.8% after the Canadian ecommerce company forecast slowing revenue growth for the current quarter despite price hikes and new product launches.
Declining issues outnumbered advancers for a 5.76-to-1 ratio on the NYSE and 2.82-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and one new lows, while the Nasdaq recorded 28 new highs and 22 new lows.
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