Surging Inflation Gives Wall Street Jitters

Wall Street closed sharply lower on Wednesday as surging consumer prices curbed investor risk appetite, and stoked worries of a protracted wave of red hot inflation.

All three major US stock indexes fell, extending their losses throughout the trading day and adding to Tuesday's sell-off which snapped the S&P 500's and Nasdaq's eight-session runs of all-time closing highs.

"It's not surprising that after what was truly a historic run for the market to take a pause," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. "But we do think there are enough tailwinds heading into year-end to move the market higher."

The Labour Department's consumer price index (CPI), delivered a hotter-than-expected jump of 0.9 percent and the fastest year-on-year gain in 31 years.

The report hinted that the persistently tangled global supply chain could result in the current inflation wave taking longer to abate than many – including the U.S. Federal Reserve – had hoped.

"The inflation story is really the driver that drives all things," Mayfield added. "It will affect Fed policy and fiscal policy, it's the driver of interest rates. It's hard to talk about anything but inflation."

And Gregory Daco, chief economist of Oxford Economics, believes this report means current price spikes have some staying power.

"I think things will continue to get worse before they get better in terms of the inflation outlook because we don't see core inflation peaking until sometime in early 2022," Daco said.

The Dow Jones Industrial Average fell 0.66 percent, to 36,080, the S&P 500 lost 0.82 percent, to 4,647 and the Nasdaq Composite dropped 1.66 percent, to 15,623.

Tech weighed heaviest on the S&P 500, with megacaps Apple and Microsoft among the biggest drags.

Walt Disney shares dropped more than 4 percent in after-hours trading after the media company reported disappointing streaming subscriber numbers. (Reuters)