US stocks plummet as inflation figures fuel Fed worries

ISTANBUL

US stocks plummeted to close Tuesday with major losses as inflation figures coming above expectations fueled worries that the Federal Reserve's first interest rate cut this year could be delayed.

The Dow Jones Industrial Average lost 524 points, or 1.35%, to finish the day at 38,272. The blue-chip index had its worst daily performance since March 2023.

The S&P 500, meanwhile, tumbled 68 points, or 1.37%, to 4,953.

The Nasdaq plummeted 286 points, or 1.8%, to end the session at 15,655.

Annual consumer inflation in the US came in at 3.1% in January, slowing from a 3.4% gain in December, but it was higher than estimates of 2.9%.

The Consumer Price Index (CPI) rose 0.3% in January compared to the previous month, while expectations were for it to show a gain of 0.2%, according to figures from the Labor Department's Bureau of Labor Statistics released earlier.

Core CPI, which excludes volatile food and energy prices, gained 0.4% in January from the previous month, higher than estimates of 0.3%. Annually, core CPI climbed 3.9% in January, also higher than expectations of 3.7%.

Inflation figures coming in higher than market expectations could delay the Federal Reserve's first rate cut later this year.

The probability of a rate cut of 25 basis points at the Fed’s March meeting stood at just 8.5% at 4.17 p.m. EDT, according to the FedWatch Tool provided by the US-based Chicago Mercantile Exchange Group.

The probability of a cut of 25 basis points at the May meeting was 36.4%, and at 49.6% for the June meeting.

The VIX volatility index, also known as the fear index, soared 13.8% to 15.85, while the 10-year US Treasury yield jumped 3.7% to 4.324%.

The dollar index increased 0.7% to 104.88, while the euro shed 0.6% to $1.0708 against the greenback.

Precious metals were in negative territory, with gold trimming 1.3% to $1,993 per ounce and silver decreasing 2.7% to $22.07.

Oil prices showed gains, with global benchmark Brent crude adding 0.7% to $82.60 per barrel and US benchmark West Texas Intermediate crude increasing 1.1% to $77.78.