Nasdaq Plunges 481 Points as Inflation Concerns Rise; Dow and S&P 500 Also Tumble

Stocks slid sharply as core PCE inflation rose more than expected, dampening hopes for Fed rate cuts. Tech, airline and retail sectors led the decline.

The tech-heavy Nasdaq posted a particularly steep loss, plunging 481.04 points or 2.7%. The S&P 500 also tumbled 112.37 points or 2.0% to 5,580.94, while the Dow slumped 715.80 points or 1.7% to 41,583.90.

Commerce Department report showed consumer prices increased in line with economist estimates, core consumer prices rose by slightly more than expected. Its personal consumption expenditures (PCE) price index rose by 0.3% in February, matching the increases seen in the two previous months as well as economist estimates. The annual rate of growth by the PCE price index was 2.5% in February, unchanged from January and in line with expectations. the report said the core PCE price index which excludes food and energy prices, climbed by 0.4% in February after rising by 0.3% in January.

The annual rate of growth by the core PCE price index also accelerated to 2.8% in February from an upwardly revised 2.7% in January. The report also showed real personal spending, which excludes price changes inched up by just 0.1% in February after sliding by 0.6% in January. "The acceleration in core PCE inflation and the softness in consumer spending is an unfavorable mix of economic data," said Nationwide Chief Economist Kathy Bostjancic. She added, "The data support our view that downside risks to the economy are emerging, but with inflation heating up, the Fed for now will maintain its wait-and-see approach."

Airline stocks were significantly weak, resulting in a 3% nosedive by the NYSE Arca Airline Index. Semiconductor stocks too turned out to be considerably weak, as reflected by the 3% plunge by the Philadelphia Semiconductor Index. Software, steel, retail and housing stocks were notably moved downwards while utilities stocks were among the few groups to buck the downtrend.

Asia Pacific moved mostly lower during trading on Friday. Japan's Nikkei 225 Index tumbled by 1.8%, while China's Shanghai Composite Index slid by 0.7%. The major European markets also moved to the downside on the day while the U.K.'s FTSE 100 Index edged down by 0.1%, the French CAC 40 Index declined by 0.9 and the German DAX Index slumped by 1%.

In the bond market, treasuries moved sharply higher in reaction to the latest U.S. economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 4.25 bps to 4.25%.

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