By Liz Moyer
Investing.com -- U.S. stocks sold off sharply after August’s inflation report came in higher than expected, ending the session with the Dow down the most since June 2020.
At 16:03 ET (20:03 GMT), the Dow Jones Industrial Average was down 1,276 points, or 3.9%, while the S&P 500 was down 4.3% and the NASDAQ Composite was down 5.2%.
The consumer price index for August showed inflation rose 0.1% from July despite the drop in the price of gasoline. From last year, inflation was up 8.3%, while analysts had expected an 8.1% print.
The selloff hit tech stocks particularly hard, with Apple Inc (NASDAQ:AAPL) down nearly 6%, and Microsoft Corp (NASDAQ:MSFT) down more than 5%, while shares of Meta Platforms Inc (NASDAQ:META) dropped more than 9%.
Money markets forecast an 81% chance of a 75-basis-point increase in interest rates when the Federal Reserve meets next week, and a nearly 20% chance of a full 100-basis-point hike. Tuesday's decline comes after stocks had rallied as investors took advantage of August's market declines.
This is the last inflation report before the Fed’s policy meeting next week. Investors had hoped the Fed would have some reason to raise rates less dramatically. But the Fed is determined to quash inflation despite the risk of pushing the economy into a recession. And Tuesday's report dampens hopes that inflation has already peaked.
Twitter (NYSE:TWTR) shareholders voted to approve the $44 billion takeover deal by Elon Musk. Twitter shares rose 0.8% on Tuesday.