By Ovunc Kutlu
ANKARA (AA) - US stocks plummeted at market opening on Tuesday, as consumer inflation coming above estimate has fueled worries that the Federal Reserve could make a higher rate hike next week.
Annual consumer inflation in the US was 8.3% in August, easing from the 8.5% yearly gain in July, but coming in higher than the market estimate of an 8.1% annual increase, according to Labor Department figures released Tuesday.
The consumer price index (CPI), which measures changes in the prices of goods and services from a consumer's perspective, rose 0.1% in August on a monthly basis, despite a 10.6% decline in the gasoline index and a 5% fall in the energy index.
As consumer inflation came above the market expectation, the Fed's probability of making a 75 basis points of a rate hike on Sept. 21 rose to 90%, according to the FedWatch Tool provided by US-based global markets company Chicago Mercantile Exchange (CME) Group.
What worries investors the most is the probability of making a rate hike of 100 basis points, which climbed to as high as 18% shortly before the opening bell on the New York Stock Exchange.
The Dow Jones was down 535 points, or 1.65%, to 31,846 at 9.33 am EDT. The S&P 500 fell 85 points, or 2.07%, to 4,025.
The tech-heavy Nasdaq decreased 332 points, or 2.7%, to 11,933.
The VIX volatility index, also known as the fear index, soared 4.5% to 24.95. The 10-year US Treasury yield rose 2.6% to 3.449%.
While the dollar index increased 1% to 109.44, the euro was down 1% to $1.0020 against the dollar.
Precious metals were on the decline with worries amid a higher Fed rate hike. Price of gold fell 1.3% to $1,702 and silver lost 1.3% to $19.55.
Oil prices were almost flat. Global oil benchmark Brent crude was trading at $94.09 a barrel for a 0.1% gain, and the US benchmark West Texas Intermediate (WTI) was around $88.25 per barrel – a 0.5% increase.