US stocks got off to a rough start as they opened sharply lower on Wednesday. The setback was due to an unexpected increase in consumer prices last month.
Big stock market players, including the Dow Jones Industrial Average, dropped significantly by over 1% – a dip of more than 400 points. The S&P 500 and the tech-based Nasdaq Composite both fell by around 1.2%. Furthermore, bond yields were noticeably high as the 10-year Treasury yield rose by an impressive 14 basis points on Wednesday, reaching above the 4.5% line for the first time in 2024.
The Consumer Price Index, a measure of the average change in prices over time of goods and services, may be to blame for these sudden market changes. It rose by 0.4% in comparison to the previous month and increased by 3.5% over the previous year in March. These figures surpass the economist forecasts by 0.1%.
The surge in inflation forces investors to rethink the likelihood of rate cuts from the Federal Reserve. Recent data from the CME FedWatch tool shows approximately 75% of bets are on the Federal Reserve maintaining the current rate levels in June. Additionally, over 50% of investors are expecting the central bank to leave rates unchanged through its July meeting.
As we look ahead, the future of the market remains uncertain. Wednesday will reveal the minutes from the middle of March Fed’s meeting, which may offer some insights into potential future policy. Additionally, industry experts will be watching Delta Airlines and large Wall Street banks as they release their first-quarter earnings reports this week.
Vocabulary List:
- setback (noun): A reversal or check in progress.
- bond yields (noun): The amount of return an investor receives on a bond.
- inflation (noun): A general increase in prices and fall in the purchasing value of money.
- forecast (noun): A prediction or estimate of future events or conditions.
- uncertain (adjective): Not able to be relied on not known or definite.
- insights (noun): The capacity to gain an accurate and deep understanding.
