The US stock market closed lower on Wednesday, as investors grappled with rising inflation expectations and a sell-off in technology shares. The Dow Jones Industrial Average fell 0.83% to 34,618.24 points, while the S&P 500 dropped 1.22% to 4,443.05 points. The Nasdaq Composite, which is heavily weighted with tech stocks, plunged 1.75% to 15,202.40 points.
The market was rattled by a report from the Labor Department that showed consumer prices rose 0.3% in August, slightly lower than expected, but still pushing the annual inflation rate to 5.3%, the highest since 2008. The report also revealed that core inflation, which excludes food and energy costs, rose 0.1% in August, the smallest increase since February.
Some analysts said the inflation data could ease some pressure on the Federal Reserve to taper its bond-buying program, which has supported the economic recovery from the pandemic. However, others warned that inflation could remain elevated for longer than anticipated, as supply chain disruptions and labor shortages persist.
Meanwhile, the tech sector was hit by a wave of selling, as investors rotated out of high-growth stocks and into value-oriented sectors such as energy and financials. Some of the biggest losers in the Nasdaq were Tesla (-1.65%), Apple (-0.74%), Amazon (-4.33%), and Nvidia (-4.82%). The sell-off was also fueled by concerns over China’s regulatory crackdown on its tech giants, which could hurt their earnings and growth prospects.
On the positive side, some stocks bucked the downtrend and posted strong gains on Wednesday. Novavax (+27.96%) surged after announcing that it had initiated the rolling submission process for its Covid-19 vaccine candidate to the World Health Organization. Cara Therapeutics (+13.04%) soared after reporting positive results from a phase 3 trial of its drug for chronic kidney disease-associated pruritus. Iovance Biotherapeutics (+13.46%) jumped after receiving a buy rating from Piper Sandler.
The US stock market will face more challenges in the coming days, as investors await the outcome of the Fed’s policy meeting next week, as well as the release of more economic data and corporate earnings reports.