The Dow Jones Industrial Average (DJIA) lost 1,276.37 points on Tuesday, falling by 3.94% to 31,104.97. The S&P 500 had its worst day of 2022, losing 177.72 points, or 4.32% of its value, to end at 3,932.69. The Nasdaq Composite fared even worse, falling by 632.84 points to end at 11,633.57, or a 5.16% drop.
The last time the Dow suffered such a massive loss was on June 11, 2020, when it lost 1,861 points.
The losses were massive and spanned nearly 500 listed companies, with big firms such as Meta losing 9.4% of their share value and NVidia losing 9.5%.
The collapse came on the heels of a report showing the central bank's response to record-high inflation had done little to impact the depreciation of the dollar.
The US Bureau of Labor Statistics released its monthly Consumer Price Index (CPI) report on Tuesday. The document tracks changes in the prices of key consumer products and showed that in August 2022, prices were 8.3% higher than they were in 2021.
“The CPI report was an unequivocal negative for equity markets. The hotter than expected report means we will get continued pressure from Fed policy via rate hikes,” Matt Peron, director of research at Janus Henderson Investors, told CNBC. “It also pushes back any ‘Fed pivot’ that the markets were hopeful for in the near term.”
On the heels of the report, the US Federal Reserve is expected to make its biggest increase in interest rates yet when it meets next week: a full percentage point, expressed as 100 base points.
While higher interest rates are intended to limit intra-bank lending and thus the creation of new money, an April study by the Economic Policy Institute found that corporate profits accounted for 54% of inflation in the United States in the last two years, meaning the problem is price speculation, not overeager lenders.