NEW YORK - Wall Street equities took a beating on Tuesday following disappointing US inflation data, ending the day with steep losses in the worst trading day in weeks.
The benchmark Dow Jones Industrial Average plunged nearly 1,300 points, a 3.9 per cent loss to finish the session at 31,104.97.
The broad-based S&P 500 dropped 4.3 per cent to 3,932.69, while the tech-rich Nasdaq Composite Index collapsed 5.2 per cent to 11,633.57.
Investors had been clinging to hopes that slowing price increases would allow the Federal Reserve to eventually pull back on its tough anti-inflation fight, but the data extinguished those hopes for now.
While the annual increase in the consumer price index (CPI) slowed slightly in August to 8.3 per cent, inflation actually rose 0.1 per cent compared to July, the Labour Department said, a disappointing result amid widespread expectations that CPI would fall in the month.
More concerning, the report showed that excluding volatile food and energy prices, "core" CPI accelerated sharply in August, and rose 6.3 per cent over the past 12 months, after the 5.9 per cent pace seen in July and June.
Despite the welcome relief from falling gasoline prices, food, housing and medical care costs continue to rise.
Economists say the data confirm the Fed will announce a third consecutive three-quarter point hike.
That prompted the worst point loss for the Nasdaq since May 5.
"Today was a crazy day," said Greg Bassuk of AXS Investments, who added that the decline was "more than just a one-off overreaction".
"I think part of the strong reaction today is based on the greater concern that investors in the market have about how deep the level of or the extent to which high prices have infiltrated in areas that were less anticipated," he told AFP.
Beyond the inflation news, Twitter shareholders voted to approve Elon Musk's US$44 billion (S$60 billion) takeover deal.
The decision clears the way for the contract to close, even as billionaire Musk is trying to cancel the purchase, and is embroiled in a lawsuit by Twitter trying to force him to go through with it.
Meanwhile, whistleblower Peiter Zatko told the US Congress on Tuesday that the platform ignored his security concerns and company leadership is "misleading the public."
Shares of the social media platform closed 0.8 per cent higher. AFP