MENA Newswire News Desk: U.S. stock indices faltered Wednesday following new inflation data, tempering expectations of a significant Federal Reserve rate cut. The Dow Jones Industrial Average plunged by 414 points, closing down by 1%, while the S&P 500 declined by 0.5%. The Nasdaq Composite saw minimal gains, rising by nearly 0.2%.
UnitedHealth Group, Travelers, and Amgen were among the major contributors to the Dow’s downturn. The banking sector also dragged on the markets, with JPMorgan Chase falling nearly 1% following cautious forecasts about its net interest income for 2025. Stocks fell sharply after core CPI, excluding food and energy, climbed more than anticipated, dimming the prospects for a substantial rate reduction by the Fed.
Traders now see an 85% likelihood of a modest 25 basis point cut at the Fed’s upcoming meeting on September 17-18, a steep adjustment from previous expectations for a more aggressive cut. The core inflation uptick sent a chill through the market, with the overall CPI marking its lowest annual increase since February 2021.
Steve Sosnick, Chief Strategist at Interactive Brokers, remarked on the inflation data’s impact, noting that the higher-than-expected core reading dampened the previously hopeful market sentiment. “It was a big splash of cold water on a market that was hopeful for a 50 basis point rate cut,” he explained.
The broader market’s downturn reflects historical trends, with September often being the worst month for stocks over the past decade. The S&P 500 has ended this month in the red for the last four consecutive years, averaging a loss of over 1%. Financial stocks experienced their sharpest decline since early August, with the S&P 500 financials sector losing over 2% in a single day. Companies like Discover Financial, Capital One, and Regions Financial led the downturn, while other major banks including Bank of America, JPMorgan Chase, and Goldman Sachs also suffered losses.