The stock market dropped by 700 points, causing great turmoil in the American markets. It had recently reached the symbolic 50,000 mark, proving that markets can turn around in a very short period of time.
The reason for the stock drop is the high inflation in the US economy, which economists had expected to be lower. High inflation combined with the high interest rates are pushing towards higher unemployment, putting the entire economy at risk. CNBC says:
Stocks dropped on Tuesday after hotter-than-expected inflation data for January spiked Treasury yields and raised doubts that the Federal Reserve would be able to cut rates several times this year, a key part of the bull case for the equity market.
The Dow Jones Industrial Average lost 708 points, or 1.8%, its biggest drop since February 21 2023, when it lost 697 points to fall 2.06%. The S&P 500slid 1.8%, while the Nasdaq Composite fell 2%.
Lower inflation does not mean lower prices, just that the rate of increase slows down. Ever since Biden took office, inflation has been high while household income has barely caught up. Yahoo Finance reports on inflation and Bitcoin:
When removing the volatile food and energy categories, Tuesday’s Consumer Price Index (CPI) release showed “core” prices increased 0.4% in January, their largest monthly gain since April 2023. On a headline basis, prices increased 3.1%, above economist estimates but a deceleration from a 3.4% annual gain in December.
In other markets, the price of bitcoin (BTC-USD) hovered below $50,000 after the leading cryptocurrency hit the closely watched level for the first time since 2021, seen as a remarkable comeback.
In times of uncertainty, investors turn to commodities like gold as a hedge. Bitcoin seems to be filling this role now too, even as remains mostly a speculative asset rather than a true currency.
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