NEW YORK—Stocks are tumbling and disappointment is shaking markets worldwide Tuesday, following Wall Street’s realization that inflation isn’t slowing as much as hoped.
The S&P 500 sank 2.3 percent in early trading Tuesday, threatening to snap a four-day winning streak. Bond prices also fell sharply, sending their yields higher, after a report showed inflation decelerated to 8.3 percent in August, instead of the 8.1 percent economists expected.
The disappointing data means traders are bracing for the Federal Reserve to ultimately raise rates even higher than expected to combat inflation, with all the risks for the economy that entails.
“Right now, it’s not the journey that’s a worry so much as the destination,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “If the Fed wants to hike and hold, the big question is at what level.”…