Another disappointing inflation report thumps Wall Street

Wall Street tumbled Thursday, and stocks fell by the most in four weeks following more evidence that high inflation is staying stickier than expected.

The S&P 500 dropped 1.4% after a report said inflation at the wholesale level slowed by less last month than economists forecast. It echoed a report on prices at the consumer level from earlier this week that suggested inflation isn’t cooling as quickly and as smoothly as hoped.

The Dow Jones wIndustrial Average lost 431 points, or 1.3%, while the Nasdaq composite dropped 1.8%.

Stocks have been churning recently as worries about sticky inflation joust against data suggesting the economy remains more resilient than feared. The worry is that persistently high inflation will push the Federal Reserve to get even more aggressive on interest rates. Higher rates can drive down inflation but also drag on investment prices and raise the risk of a serious recession.

Such fears have been most clear in the bond market, where yields have leaped this month as traders raise their forecasts for how high the Fed will take interest rates.

The yield on the two-year Treasury, which tends to track expectations for Fed action, rose to 4.67% from less than 4.60% before the inflation report’s release and from less than 4.10% earlier this month. It’s near its highest level since November, when the yield reached levels last seen in 2007.

Thursday’s inflation report showed that prices at the wholesale level were 6% higher last month than a year earlier. While that was a slowdown from December’s rate, it was worse than what economists expected. Perhaps more concerning was that inflation accelerated in January on a month-tomonth basis even after stripping out prices for food, energy and other layers.

The inflation report thudded onto Wall Street along with a batch of other data painting a mixed picture of the economy.

Fewer workers applied for jobless benefits last week than expected, a sign that layoffs remain low across the economy. That’s good news for workers and another signal of strength for the job market, but the Fed worries it could also add upward pressure on inflation.

Other reports showed a measure of manufacturing activity in the mid-Atlantic region plunged this month, while homebuilders broke ground on fewer homes last month than economists expected.