NEW YORK (AP) — Stocks tumbled to their worst day in more than two years Tuesday, knocking the Dow Jones Industrial Average down more than 1,250 points, following Wall Street’s humbling realization that inflation is not slowing as much as hoped.
The S&P 500 sank 4.3%, its biggest drop since June 2020. The Dow fell 3.9% and the Nasdaq composite closed 5.2% lower. The sell-off ended a four-day winning streak for the major stock indexes and erased an early rally in European markets.
Bond prices also fell sharply, sending their yields higher, after a report showed inflation decelerated only to 8.3% in August, instead of the 8.1% economists expected.
The hotter-than-expected reading has traders bracing for the Federal Reserve to ultimately raise interest rates even higher than expected to combat inflation, with all the risks for the economy that entails. Fears about higher rates sent prices dropping for everything from gold to cryptocurrencies to crude oil.
“Right now, it’s not the journey that’s a worry so much as the destination,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “If the Fed wants to hike and hold, the big question is at what level.”
The S&P 500 fell 177.72 points to 3,932.69. The drop didn’t quite knock out its gains over the past four days. The index is now down 17.5% so far this year.
The Dow lost 1,276.37 points to 31,104.97, and the Nasdaq dropped 632.84 points to 11,633.57. Big tech stocks swooned more than the rest o
