Stocks plummeted Tuesday after a hotter than expected inflation report showed prices rising more than had been expected last month. All three major indexes put up their worst numbers since June of 2020.

Tech stocks logged the biggest losses, as the Nasdaq dropped 5.2%. This was the seventh plunge of 4% or more for the Nasdaq this year, according to data from Bespoke Investment Group. Last year the index failed to drop that much even once, while in 2020 there were ten such drops.

The S&P 500 dropped 4.3%, as the Dow Jones Industrial Average lost more than 1275 points, marking a roughly 4% loss.

Early Tuesday the Bureau of Labor Statistics released its Consumer Price Index for August. Economists had predicted it would show an 8.1% year over year increase for August and a 0.1% decline over the prior month. Instead the actual report showed an 8.3% increase year over year and a 0.1% increase over the prior month.

Although that represented a moderation of rising prices, the smaller than expected decline in rising prices means that a third consecutive 0.75% rate hike is practically assured at the next Fed meeting, and there are even rumors now of a full 1% hike in some circles.

Core inflation, excluding volatile food and energy prices, rose 6.3% for the year and 0.3% for the month. Shelter accounted for most of the rise, increasing 0.7% over the prior month, the biggest rise since January of 1991. Shelter makes up about a third of the CPI.

Seema Shah, chief global strategist at Principal Global Investors wrote in a note, “Headline inflation has peaked but, in a clear sign that the need to continue hiking rates is undiminished, core CPI is once again on the rise, confirming the very sticky nature of the U.S. inflation problem.”

Investors are now pricing in an 82% chance of a 0.75% increase next week, and an 18% chance of a full 1% rate hike, according to data from the CME Group. One week ago that data showed a 75% chance of a 0.75% rate hike, and a 25% chance of a 0.50% rate hike.

Now attention will turn to the next Fed meeting, however shortly thereafter second quarter earnings season will begin. DataTrek’s Nicholas Colas noted, “Once we get past this week’s CPI and PPI inflation reports and next week’s FOMC meeting, the next major market catalyst will be Q3 earnings.”

FactSet Research data shows earnings growth expectations presently sit at a rise of 3.7% for the third quarter, which is a substantial adjustment from the 9.8% growth rate expected at the end of June.

Q3 earnings expectations for every sector in the S&P 500, excepting energy, have been cut over the last 2-3 months. Analysts now expect year over year declines in earnings for seven out of the eleven sectors in the index, a sharp rise from the three sectors they expected to decline as of the second quarter.

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