US stocks opened sharply lower on Wednesday after a key inflation report showed an unexpected uptick in consumer prices last month. The Dow Jones Industrial Average fell over 1%, the S&P 500 dropped about 1.2%, and the tech-heavy Nasdaq Composite was down over 1.2%. The 10-year Treasury yield gained as much as 14 basis points, touching above 4.5% for the first time in 2024.
The Consumer Price Index (CPI) rose 0.4% over the previous month and 3.5% over the prior year in March, an acceleration from February’s 3.2% annual gain in prices. Both measures exceeded economist forecasts, prompting investors to expect fewer rate cuts from the Fed this year. The CME FedWatch tool now shows around 75% of bets are on the Fed holding steady at current rate levels in June, with more than half of investors also expecting the rate to remain unchanged through July.
The hotter-than-expected inflation reading sent bond yields soaring and cooled investors’ hopes for interest rate cuts at the beginning of the summer. Interest ratesensitive sectors like Real Estate and Utilities experienced selloffs, and the news impacted futures tied to the three major indexes, which fell about 1%. Overall, the market reaction to the unexpected uptick in consumer prices reflects concerns about inflation and its potential impact on future rate decisions by the Federal Reserve.
