US stocks fall sharply on higher than expected CPI number

The main US equity indices reacted negatively to higher-than-expected US Consumer Price Index (CPI) data on Wednesday. The two key components the market was focusing on were the yearly CPI, which came in at 9.1% versus 8.8% expected, and the core number of 5.9% versus 5.7% expected. Fed funds futures markets had been pricing a near 100% certainty that the Fed would raise rates by another 75 basis points at its July meeting. Interest rate-sensitive equities such as the Nasdaq fell sharply as more aggressive interest rate rises may now be needed. Nasdaq Futures are down 2.4% on the news. The 2-year and 10-year yields immediately spiked again by over 3%.

Stock market reaction

Equity indices immediately moved sharply lower on the release as investors see more interest rate rises ahead. The Nasdaq dropped 400 points and the S&P 500 also fell over 1% immediately on the CPI release.