US stock futures tumbled as new consumer price inflation (CPI) readings came out before the market open, coming in hotter than initially expected. For the markets in general, this ensures another large rate hike by the Federal Reserve (Fed) soon, possibly leading to lower returns from risk assets.
The analyst highlighted the S&P 500 index, treasury bonds, and gold are all down in unison on CPI news, suggesting that there is ‘nowhere to hide.’
Baclechunas added on the impact of data:
“I keep thinking about those days of the ‘everything rally’ where everything went up together. Now, the opposite. To quote Goodfellas, “This is the bad time.”
Wiping out gains
S&P 500 futures sank on the news wiping out gains seen in the previous session; meanwhile, the index is flirting with 2-year lows, Nasdaq futures dropped by 3%. While the US consumer prices hit a 40-year high to 9.1%, it became clear that efforts by the central bank to fight off inflation have so far been futile.
Meanwhile, the largest CPI data increase was seen in the shelter, food, and medical care indexes, while the gasoline index fell by 4.9%. While the food index rose by 0.8%, the energy index, in general, declined by 2.1%, a continuation of the 5% drop seen in August.
RSM US Chief Economist Joseph Brusuelas also took to Twitter to voice his opinion on the stickiness of inflation.
As things stand now, more rate hikes will be on the table, along with more volatility and possibly red days to come, despite some signs that a recovery in stocks could occur soon.
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