Wild day on Wall St after huge crash

Losses on the Nasdaq hit three per cent soon after the market opened, while both the Dow and S&P 500 were down around two per cent, touching two-year lows as consumer inflation data showed prices rising twice as fast as expected in September.

But by midday, the S&P 500 had completed a neck-snapping turnaround of more than four per cent to be sitting two per cent higher.

It had some suggesting the market — which had been on a severe downward trend since August — may have reached the bottom.

Others weren’t so bullish.

“It’s the nature of the beast these days where sometimes you get these intraday big swings. We can all speculate on what might be behind it,” said Liz Ann Sonders, chief investment strategist for Charles Schwab & Co told Bloomberg. “A lot of it has to do, for lack of a better word, the mechanics of the market, the fact that there’s more shorter-term money in the market, there’s more money that moves around based on algorithms, quantitative strategies. And at any point in time you can have triggers that can cause a 180 in the middle of the day.”

US consumer prices rose 0.4 per cent in September compared to August, twice the 0.2 per cent projected by analysts even as the annual increase in the consumer price index slowed slightly to 8.2 per cent from 8.3 per cent.

But core inflation, excluding volatile energy and food prices, climbed to 6.6 per cent from 6.3 per cent in August.

Analysts said the report added more certainty to expectations that the Fed will extend its policy of super-sized interest rate hikes at its next meeting in November.

“The key takeaway from the report is the recognition that core inflation has gotten worse, driven by widespread pricing pressures,” said Briefing.com analyst Patrick O’Hare.

“This understanding will cement expectations for a 75-basis point rate hike at the next FOMC meeting and stir worries that the Fed will stay on an aggressive rate-hike path longer than hoped,” he added.

The US Federal Reserve has raised interest rates at an aggressive clip of 0.75 percentage points at its last three meetings, and signalled plans to continue doing so until rampant inflation is brought under control.

That has led to a slump in stock prices in recent months, as higher interest rates will reduce consumer spending power.

Last month saw a brief rally in stocks after data suggesting that the US economy was slowing, as investors hoped that it would allow a “pivot” by the Fed to a slower rate of interest rate hikes.

“The strong CPI only reinforces the view that there is no way the Federal Reserve can contemplate a ‘pivot’ this year,” said Stephen Innes at SPI Asset Management.

— with AFP