Shortly after the open, the S&P 500 fell more than 2%, the Dow closed up 1.7%, while the tech-heavy Nasdaq fell 2.8%. The Bureau of Labor Statistics released the Consumer Price Index (CPI) for August early Tuesday, which showed prices rose 8.3 percent from a year earlier and 0.1 percent from the previous month. Economists had expected an 8.1% increase in inflation compared to last year and a 0.1% decrease compared to the previous month. That measure signals some slowdown in price increases – which hit four-decade highs earlier this year – but this smaller-than-expected drop will likely secure another 0.75% rate hike from the Federal Reserve at its policy meeting on next week. On a “core” basis, which excludes the more volatile food and energy costs, prices rose 6.3% from a year ago in August and 0.3% from the previous month. Much of the steady increase in core inflation came from housing costs, which rose 0.7% last month in August, the most since January 1991. Housing costs make up about a third of the CPI. “Core inflation has peaked but, in a clear sign that the need to continue hiking rates is unabated, core CPI is once again on the rise, confirming the very sticky nature of the US inflation problem,” Seema said. Shah, head of global strategy at Principal Global Investors. After Tuesday’s report, data from the CME Group showed investors were pricing in an 82% chance of a 0.75% rate hike next week and an 18% chance of a 1% rate hike. Last week, these figures reflected a 75%-25% split between a 75 basis point and 50 basis point rate hike. Movements along the Treasury curve were also sharp on Tuesday, with the 10-year yield rising to around 3.44%, while the 2-year yield rose 15 basis points to 3.72%. U.S. Federal Reserve Board Chairman Jerome Powell waits for a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill in Washington, U.S., January 11, 2022. Brendan Smialowski/Pool via REUTERS Elsewhere in the markets Tuesday, Peloton ( PTON ) was in the spotlight following an announcement Monday evening that co-founder John Foley is stepping down from the board, months after Peloton hired former Spotify executive Barry McCarthy as CEO . Shares fell as much as 7% early Tuesday amid a broader selloff in markets. The story continues Elsewhere, shares of Rent the Runway ( RENT ) fell as much as 30% in early trading Tuesday after the company cut full-year guidance and revealed plans to cut 24% of the company’s workforce of, citing “potentially tougher macroeconomic conditions”. In the coming weeks, market action will be on the Fed and the macro environment, but second quarter earnings season is fast approaching. “Once we get past this week’s CPI and CPI inflation reports and next week’s FOMC meeting, the next major market catalyst will be third quarter earnings,” DataTrek’s Nicholas Colas said in a note this week. According to data from FactSet Research, earnings growth expectations for the S&P 500 rose 3.7% for the third quarter, down sharply from expectations for a 9.8% increase at the end of June. Colas notes that analysts have cut third-quarter earnings expectations over the past 2-3 months for every sector in the S&P 500 except energy, and seven of the 11 groups are now expected to post an absolute year-over-year decline in earnings. in the year, compared to just three in the second quarter. — Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc Click here for the latest Yahoo Finance platform stock trends Click here for the latest stock market news and in-depth analysis, including the events that move stocks Read the latest financial and business news from Yahoo Finance Download the Yahoo Finance app for Apple or Android Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn and YouTube
