The impact the consumer price index (CPI) has on equities has reached a psychological level as rising inflation continues to take its toll on the commodity market.
Equities Market Groans Under Worsening CPI
The commodity market is not a stranger to plummeting value, but the current happenings are a bit complex. It seems that it will take a while before inflation is reduced. However, the inflationary measures appear to be a half-hearted move to address the issue by the U.S. Federal Reserve.
One rare occurrence is that all Nasdaq 100 equities closed the day at a low on Tuesday. The following price action is another reason why the last trading session looks complicated.
A price fall of more than 5% is not a common phenomenon. This performance has taken the equity market back to a level not seen for some time since last Thursday.
The panic and sentiments have little to show for the brief progress. Even though some price chops are expected from the market, which is not unusual. The bond market appears to be moving while the equity risks decrease further.
Moreover, the USD was at full throttle after the crash of the CPI, which appeared to be brief. This shows that there might be a possible intervention from the Fed to get back at the Yen. However, experts believe that this is unlikely to be an effective mechanism.
It is worth noting that the USD index is slightly weaker at 109.44 amid talks of the United States giving support to SPR at $80. The support would take close to a year to refill the SPR, so the move is partly effective. Oils are currently at $87, with the CPI performance something to consider.
Investor Optimism Takes a Dip
The Tuesday stock market crash comes with a sad tone for traders and investors. Reports show that the Dow Jones industrial average has slipped to a low of 3.94% to close the day at 31,104.97.
On a broader scale, only five stocks on the S&P 500 managed to remain in the green zone. The stock with the highest slump was tech. Meta dropped to 9.4%, and chip maker Nvidia recorded 9.5%.
The recent carnage has affected almost all the previous stock market rallies. The S&P 500 is now back to its September 6 close of 3,908. Moreover, this forced traders to look back at the June lows when the index spiraled below 3,700.
The inflation ratio in the August consumer price index report showed an unexpected outcome. The falling gas prices are followed by headline inflation of 0.1%.
On the other hand, the core inflation rate shot up to 0.6% for consecutive months. Meanwhile, the year-over-year inflation rate read 8.3%.
Industry experts state that stocks will likely retest the June lows.
Due to this, investors are wary of buying stocks during a period like this.