Stocks sold off on Wednesday after new data on the US economy, as well as comments from the head of the Federal Reserve, fueled concerns about persistent inflation in the country.
The Dow Jones Industrial Average lost 768.11 points, or 1.63%, ending at 46,225.15. The index hit a new low for the year and closed below its 200-day moving average. With a month-to-date decline now more than 5%, the Dow is on track for its worst month since 2022. The S&P 500 fell 1.36% to 6,624.70, while the Nasdaq Composite fell 1.46% to end at 22,152.42.
The Fed kept its benchmark interest rate in a range between 3.5% and 3.75%, saying in its post-meeting statement that “the implications of events in the Middle East for the US economy are uncertain.”
“The forecast is that we will see some progress on inflation, not as much as we had hoped, but some progress on inflation,” Fed Chairman Jerome Powell said during a news conference.
However, the central bank signaled that it still expects one reduction this year.
The producer price index – which tracks changes in wholesale prices – rose 0.7% in February, well above the 0.3% economists polled by Dow Jones had estimated. The report shows that inflation was already at precarious levels before the outbreak of war with Iran – an event that heightened fears of stagflation amid rising oil prices.
“The higher-than-expected headline number is specific to tariffs,” said Todd Schoenberger, chief investment officer at CrossCheck Management, noting that metals, industrial inputs and production costs saw higher prices. “This is structural inflation, not temporary, and is likely to affect monetary policy deep into the third quarter,” reports SEEbiz.
“Add to that the higher energy prices we’ve seen since the start of the Iran war, which haven’t yet been reflected in these reports, and Wall Street is bracing for rapidly rising prices that will obviously be passed on to consumers,” Schoenberger said.
