Wall St drops over 1.0pc after hot consumer prices data

Wall Street's main stock indexes tumbled on Wednesday after a stronger-than-anticipated inflation reading dampened hopes of the Federal Reserve kicking off its monetary easing cycle in June.

A Labor Department report showed the Consumer Price Index (CPI) rose 0.4 per cent on a monthly basis in March, compared with the 0.3 per cent increase expected by economists polled by Reuters. Annually, it increased 3.5 per cent, versus a 3.4 per cent estimated growth, reports Reuters.

Excluding volatile food and energy components, the core figure rose 0.4 per cent month-on-month in March, against expectations of a 0.3 per cent advance. Annually, it gained 3.8 per cent, versus the estimated 3.7 per cent increase.

"Data was hotter than expected, both on the top line and the core number... it's indicative of sticky inflation and the potential for the Fed to either cut fewer times or not at all in 2024," said Robert Pavlik, senior portfolio manager at Dakota Wealth.

"I don't think it speaks to the need for a rate hike, but stocks have to be re-priced for a different environment which is presenting itself with this inflationary data."

Yields across government bonds spiked after the data was released, with the 10-year note climbing back to 4.4806 per cent - its highest level since last November.

Traders slashed bets of the Fed cutting interest rates in June after the CPI report, estimating the central bank will wait until September before cutting rates.

Minutes from the Fed's March meeting, where it stuck to its guidance of three rate cuts this year, are due later in the day and could be key in gauging the central bank's stand on policy easing.

Atlanta Fed President Raphael Bostic said in an interview to Yahoo Finance on Tuesday that it was possible the Fed may not cut interest rates at all this year if the progress on inflation stalls and the economy continues to outperform.