Wall Street stocks and bond prices fell on Tuesday and the dollar rose after U.S. inflation data for August came in higher than expected.
The broad gauge of S&P 500 shares fell 2 percent at the opening bell, while the Nasdaq Composite, which is loaded with technology companies more sensitive to changes in interest rate expectations, fall by 2.6 percent.
The moves came after a report on Tuesday showed US consumer prices rose 0.1% in August from the previous month, compared with expectations for a 0.1% drop. The annual rate came in at 8.3%, down from 8.5% in July, but still higher than the 8.1% Wall Street economists had forecast.
Growth in core consumer prices, which strips out volatile items such as energy and food, rose to 6.3% from 5.9%.
“The [consumer price index] The report was an unequivocal negative for equity markets. The hotter than expected report means we are getting continued pressure [Federal Reserve] policy through rate hikes. It also sets back any ‘Fed pivot’ that markets were expecting 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 rose 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%.
The sell-off came in eurozone bonds, with the 10-year German Bund yield 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 fell back, both losing around 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 likelihood of a third consecutive 0.75 percentage point increase in interest rates by the central bank and for further rate hikes in November and December. The Fed’s current target range is between 2.25 percent and 2.50 percent.
In Europe, the Stoxx 600 regional indicator fell 1.1%, after rising 1.8% in the previous session. London’s FTSE 100 lost 0.8 percent.
In Asia, mainland China’s CSI 300 rose 0.4% but Hong Kong’s Hang Seng slipped 0.2% as markets in greater China reopened after a national holiday. Japan’s Topix rose 0.3%.