The U.S stock sunk on Tuesday as reports suggested that investors attempted to cash out their investments before the Consumer Price Index (CPI) data.
On Tuesday, three major stock indices opened in red and it stayed that way until the closing time. Those indices were S&P 500 Index, Dow Jones Industrial Average, and Nasdaq Composite Index. Analysts noted that the tech sector was hit strongly yesterday.
The S&P reportedly fell 0.42 percent to 4,122.47. This index had gone down for four days consecutively. The Dow also lost 58.13 points or equal to 0.18 percent and closed at 32,774.41. It had managed to hold up on Monday.
Meanwhile, Nasdaq showed the most significant drop at 1.19 percent to 12,493.93. Compared to the other major indices, Nasdaq is considered “tech-rich”.
Two contributors to Nasdaq’s drop were Nvidia and Micron Technology. Nvidia had been dropping since Monday and extended its loss on Tuesday by 3.9 percent. Micron Technology followed suit yesterday, dropping by 3.7 percent.
Analysts explained that the ongoing disruption in global chain supply affected the chipmakers.
“These are two big players that I think investors thought were in a better position to navigate through some of these recent supply chain issues. I think there’s concern that this is really going to weigh on tech,” market analyst Ed Moya said.
In addition to those tech companies, Nasdaq-listed Novavax had slumped by nearly 30 percent. The vaccine company had recently lowered its 2022 revenue guidance due to the low demand for its COVID-19 vaccines.
The CPI July data will be released on Wednesday, while producer prices data will be launched on Thursday. Economists expected the inflation to slow down compared to June, but the annual rate might still be close to the highest in the past 40 years.
Tom Cahill of Ventura Wealth Management said there was a “real concern” about how the inflation data would turn out among investors.
"There are a lot of things to look at between now and the end of the week and a lot of profit has been made over the past couple of weeks so I think there is a bit of profit taking going on," Cahill said.
Analysts said that the upcoming inflation reports offer clues about the next step that the Federal Reserve will take. Andy Brenner of National Alliance suggested that CPI could be the “turning point” for the current market.
“If we get a good CPI report, which is what a lot of people are hoping for, I think you can switch the yield curve around and you can shift the odds of the Fed to be less aggressive from more aggressive,” he said.
The Dow’s report indicated that CPI would rise 0.2 percent on a monthly basis, while its annual basis might go up by 8.7 percent. It was a downgrade from June’s prediction which showed a 1.3 percent increase on monthly basis and 9.1 percent on yearly basis.
However, last month’s consumer and producer prices reports are not the only reports that the Fed will take into account. There will be August’s employment report and CPI released before the committee’s meeting in September.