The broad S&P 500 index fell 2 percent at the open, while the Nasdaq Composite — which is loaded with technology companies that are more sensitive to changes in interest rate expectations — fell 2.6 percent. Those moves came after a report on Tuesday showed U.S. consumer prices rose 0.1 percent in August from the previous month, compared with expectations for a 0.1 percent decline. The annual rate came in at 8.3 percent, up from 8.5 percent in July, but still higher than the 8.1 percent Wall Street economists had forecast. Core consumer price inflation – which strips out volatile items such as energy and food – rose from 5.9 percent to 6.3 percent. “THE [consumer price index] the report was decidedly negative for equity markets. The hotter than expected report means we will be under constant pressure from [Federal Reserve] policy through rate hikes. It also pushes back any Fed ‘capital’ that markets were bullish on in the near term,” said Matt Peron, director of research at Janus Henderson Investors. In government debt markets, the yield on the two-year U.S. Treasury note jumped 0.17 percentage points to 3.74 percent, reflecting a sharp decline in the bond’s price. The 10-year yield rose 0.07 percentage points to 3.43%. Selling led to eurozone bonds, with the yield on Germany’s 10-year bond rising 0.08 percentage points to 1.73%. The dollar jumped 1 percent against a basket of six peers as the euro and the pound slipped, both down about 1 percent. Tuesday’s inflation report was widely expected ahead of the US central bank’s next monetary policy meeting in late September. Markets are pricing in the possibility of a third consecutive rate hike of 0.75 percentage points by the central bank and further rate hikes in November and December. The Fed’s current target range is 2.25% to 2.50%. In Europe, the regional Stoxx 600 stock index fell 1.1 percent, having risen 1.8 percent in the previous session. London’s FTSE 100 lost 0.8%. In Asia, mainland China’s CSI 300 rose 0.4 percent but Hong Kong’s Hang Seng fell 0.2 percent as markets in greater China reopened after a national holiday. Japan’s Topix rose 0.3%.
