U.S. stocks resumed their slide on Wednesday after surprisingly warm ‘core’ inflation data raised expectations of an aggressive policy tightening, sending the tech-heavy Nasdaq Composite down nearly 30% from its record level.
Growth stocks that are seen as particularly sensitive to rising rates led the declines, with the Nasdaq falling 3.2%. The blue-chip S&P 500, which had risen 1.2% earlier in the trading session, ended the day down 1.6%.
Consumer prices in the world’s largest economy rose at an annual rate of 8.3% in April, up from 8.5% in March, but still at a historically high level. The figure beat economists’ expectations for an 8.1% cooling. The month-to-month change in core inflation – which excludes food and energy prices and is closely watched by economists – also beat forecasts at 0.6%.
Rising costs for new cars, food, air fares and housing were the main drivers of the rise in consumer prices, the US Department of Labor said.
As consumer prices rose, traders expect the Fed to hike interest rates aggressively for the rest of this year, which has put pressure on short-term U.S. government debt.
The yield on the two-year Treasury note, which is particularly sensitive to monetary policy, rose 0.03 percentage point to 2.64%, from less than 0.2% a year ago. Yields rise when prices fall.
In contrast, the 10-year Treasury yield, which is driven by longer-term economic trends, lost 0.06 percentage points to 2.93%.
Learn more about today’s market moves here.