Stocks dip after hottest consumer price reading since 1990

U.S. stock dipped as inflation fears grew after October’s consumer price reading jumped at the hottest annual pace in more than three decades.

The Dow Jones Industrial Average shed about 40 points, or 0.1%. The S&P 500 dipped 0.3% and the Nasdaq Composite fell 0.8%.

The consumer price index jumped 6.2% from a year ago, well above the 5.9% estimate from economists polled by Dow Jones and the largest annual increase since 1990. On a monthly basis, the CPI increased 0.9% against the 0.6% estimate. The CPI is a basket of products ranging from gasoline and health care to groceries and rents.

“Wednesday’s Consumer Price Index showed another month of inflation data well above the Federal Reserve’s inflation target, primarily due to continued supply chain issues and labor shortages. If inflation doesn’t subside, the Federal Reserve may need to taper at a more substantial rate and hike interest rates, which could hurt stocks and bonds,” Nancy Davis, founder of Quadratic Capital Management, said.

The 10-year Treasury yield rose after the CPI report. Rising rates discount the value of future earnings and therefore can hit growth stocks like technology names particularly hard.

Technology stocks moved lower. Nvidia fell about 5%, Facebook-parent Meta dipped roughly 2%. The sell-off in Tesla continued as the electric vehicle stock fell more than 2%, a day after ending nearly 12% lower.

On Tuesday morning, the Labor Department reported a 0.6% increase in the October producer price index, which was in line with the Dow Jones consensus estimate. Wholesale prices jumped 8.6% in October from a year ago, however, the hottest annual pace on record in almost 11 years.

“The inflation narrative is still out there and needs to be resolved. We think investors will see inflation abate in the coming months as the Fed remains accommodative, people come back into the workforce and consumers shift from buying goods to services… and we expect that will pull the market higher as we move toward the end of the yea,” Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company, told CNBC.

Earnings season continues to be strong, with most of the S&P 500 companies who have already reported earnings beating estimates, according to FactSet. Disney, Affirm, Bumble and The Honest Company are all scheduled to report Wednesday after the bell.