U.S. stocks ended sharply lower on Thursday after key inflation data showed a faster-in-expected rise in consumer prices, while the 10-year Treasury yield rose after a Fed official’s comments indicated that the central bank would aggressively hike rates to combat inflation. All the three major indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 1.5% or 526.59 points to close at 35,241.59 points after touching as low as 35,100.72 points during the day’s trading. This is the blue-chip index’s worst percentage decline since Jan 18.  

The S&P 500 shed 1.8% or 83.10 points to finish at 4,504.08 points. Real estate and tech stocks which led the rally on Wednesday were the biggest losers

The Real Estate Select Sector SPDR (XLRE) fell 2.9%, while the Technology Select Sector SPDR (XLK) declined 2.6%. All the 11 sectors of the benchmark index ended in negative territory.

The tech-heavy Nasdaq tumbled 2.1% or 304.73 points, to end at 14,185.64 points, giving up all its gains made in the earlier session.

The fear-gauge CBOE Volatility Index (VIX) was down 13.94% to 14.06. A total of 12.8 billion shares were traded on Thursday, higher than the last 20-session average of 12.5 billion. Decliners outnumbered advancers on the NYSE by a 3.08-to-1 ratio. On Nasdaq, a 2.26-to-1 ratio favored declining issues.

Rising Prices Dent Investors’ Confidence

All the three major indexes took a U-turn on Thursday after finishing in the green in the earlier session. Investors had been looking forward to the key inflation data all throughout the week but the reading was a major disappointment as data showed consumer prices increased hotter than expected and the largest gain in 40 years.

The inflation data was a major setback for investors that saw stocks taking a hit just after the opening bell. However, the loses were pared gradually only to take another hit after St. Louis Federal Reserve Bank President James Bullard commented that he would expect at least a full percentage point of rate hike by the Fed over its next three meetings or by July 1.

This saw equities taking another blow as investors rushed for massive sell off. Growth stocks took a beating as fears of rising interest rates once again saw the 10-year Treasury yield jump 10 basis points to cross the 2% threshold for the first time since 2019. The 10-year Treasury note traded at 2.028%.

Big tech suffered the most with shares of Microsoft Corporation (MSFT Quick QuoteMSFT - Free Report) and Meta Platforms, Inc. declining 2.8% and 1.7%, respectively. Microsoft has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

E-commerce stocks like Shopify Inc. (SHOP Quick QuoteSHOP - Free Report) declined 3.4%, while Adobe Inc. (ADBE Quick QuoteADBE - Free Report) fell 5.1%.

Economic Data

The government said on Thursday that U.S. inflation jumped 7.5% in January on a year-over-year basis, to record its largest increase since 1982. On a month-over-month basis, consumer-price index increased 0.6% in January, higher than economists’ expectations of a rise of 0.4%.

In a separate report, the Labor Department said on Thursday that initial jobless claims declined to 223,000, declining 16,000 for the week ending Feb 5. The four-week moving average also rose to 253,250, a decrease of 2,000 from the previous week’s revised average of 255,250.

However, continuing claims came in at 1,621,000, unchanged from previous week’s revised level of 1,621,000. The previous week's numbers were revised down by 7,000 from 1,628,000 to 1,621,000. The 4-week moving average came in at 1,634,500, an increase of 16,500 from the previous week's revised average.