A worse-than-expected report on inflation is hitting Wall Street, and stocks are falling toward their weakest levels in almost two years. The S&P 500 was 1.4% lower after a government report showed inflation is spreading more widely across the economy.
But Thursday’s disappointing data means many investors now expect a fifth such increase in December, dashing expectations that the Fed may begin downshifting soon. Bets are increasing that the Fed could pull its overnight rate above 5% by early next year. It started this year at virtually zero.
“If the Fed insists on continuing to hike until the numbers improve, they are going to over-hike,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “They’re swinging from doing too little to doing too much. Those two vices don’t cancel out.”The growing expectations for an even more aggressive Fed sent Treasury yields jumping. The yield on the 10-year Treasury, which helps set rates for mortgages and many other loans, soared to 4.01% from 3.
The inflation report thudded onto Wall Street just as companies gear up to report how much profit they earned during the summer.
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