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Your Evening Briefing: Markets Crater on Hot Inflation Data

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US shoppers in New York City’s Herald Square. 

US shoppers in New York City’s Herald Square. 

Photographer: Victor J. Blue/Bloomberg

Markets tumbled on Tuesday after the latest inflation reading dashed hopes that surging prices had peaked across the US economy. The S&P 500 dropped 4.3% (its worst day since June 2020) and the tech-heavy Nasdaq fell 5%. Many investors now expect a full 100-basis point rate hike by the Federal Reserve during its policy meeting next week to rein in inflation. The consumer price index advanced in August—after no change in July—pointing to a stubbornly high cost of living for Americans despite recent relief at the gas pump. The Fed has a much harder task on its hands than previously thought: If Americans won’t dial back spending further, odds favor the central bank becoming that much more aggressive and potentially sending the economy into a downturn. Here’s your markets wrap