Dow falls 400 points, Treasury yields jump after strong inflation data: Live updates

Stocks tanked on Wednesday after March inflation data came in hotter than expected, likely pushing off interest rate cuts by the Federal Reserve that investors have been anticipating.

The Dow Jones Industrial Average dropped 463 points, or 1.2%. The S&P 500 and Nasdaq Composite slid 1% each.

All sectors in the broad market index were red for the day. Real estate fell around 4%, leading sector losses for the day. The S&P 500 had been treading water in April in anticipation of this inflation report following a roaring start to the year where the benchmark rallied 10%, its best first-quarter gain in five years.

The CPI in March rose 0.4% for the month and 3.5% year-over-year, versus estimates of a 0.3% monthly increase and 3.4% year over year, according to economists polled by Dow Jones. Core CPI, which excludes volatile food and energy prices, accelerated 0.4% from the previous month while rising 3.8% from a year ago, compared to estimates for 0.3% and 3.7%, respectively. CPI in April increased at a 3.2% annual pace for all items.

Fed funds futures trading data now suggests just a 20.6% likelihood that the Fed will lower rates at its June meeting, according to the CME FedWatch Tool. Traders are now betting that the first rate cut will likely take place at the central bank’s meeting in September.

The 10-year Treasury yield, a benchmark for mortgage and other loans, soared back above 4.5% as March CPI reaccelerated from the prior month, defying a Federal Reserve hoping for inflation to slow back to its 2% target. The 2-year Treasury yield spiked to nearly 5%.

Bank shares, including JPMorgan Chase, and industrial shares like Honeywell, respectively slipped 1% and 1.9% on worries higher rates will start to suffocate the economy. Once red-hot tech stocks Microsoft and Apple also pulled back 0.9% and 0.7%, respectively. Small-cap benchmark Russell 2000 dropped 2.6%.

“As we continue to see multiple reports in a row that are higher-than-expected, it becomes more difficult for the Fed to advocate cutting rates any time soon,” said Chris Zaccarelli, Independent Advisor Alliance chief investment officer.

Although the markets have managed to shake off January and February’s hot inflation data, signs of persistent inflation are fueling Wednesday’s downturn, according to Eric Diton, president and managing director of The Wealth Alliance.

“This is as good a catalyst as any. I don’t think this is the end of the bull market. But I do think it’s an excuse for a lot of people who have had a lot of gains, to take some of those gains off the table,” Diton said.

March’s Fed meeting minutes released Wednesday afternoon raised officials’ concerns that inflation isn’t moving quickly enough toward the Fed’s 2% target, further dampening investor sentiment.