Dow drops over 600 points as stocks tumble after hotter-than-expected CPI reading

U.S. stocks opened sharply lower Tuesday after an unexpected monthly rise in the August consumer-price index dashed hopes for a further slowdown in inflation and reinforced expectations Federal Reserve policy makers will continue to aggressively tighten monetary policy.

What’s driving markets The August consumer-price index, or CPI, rose 0.1% in August, though the year-over-year rate slowed to 8.3% from 8.5% in July. Economists had looked for a monthly fall of 0.1% that would bring the year-over-year rate down to 8%. However, the core rate, which strips out volatile food and energy prices, rose 0.6%, for a year-over-year rise of 6.3%, outstripping expectations for a 0.3% monthly rise and a 6% year-over-year pace.

“In recognition of these uncertainties, investors should maintain an underweight risk posture, particularly given the premium valuations still prevalent in equity markets,” he wrote.

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