Stocks fall on CPI inflation report, tech leads losses

Yahoo Finance’s Jared Blikre breaks down how markets opened on Tuesday.

Video Transcript

BRAD SMITH: Welcome back to Yahoo Finance Live this morning, everyone. Markets down across the board for the major averages here in the US. The Dow, the S&P 500, and the NASDAQ all down by nearly 2% or more. The Dow down by about 1.9%, S&P 500, 2.3% in the red, and the NASDAQ down 3% right now after August's inflation reading came in hotter than expected. So is this quiet period ahead of the Fed about to get noisy for markets? Let's get on over to Jared Blikre for the reaction here this morning.

JULIE HYMAN: It feels like it's already-- that's already happening today.

JARED BLIKRE: Yes, this is an actual signal and not just noise, guys. We got the big report right here. You can see the carnage in the markets. Just going to show you the NASDAQ futures so we can show you what happened at 8:30 AM. And that is a big downdraft, not much of a reaction and down further still. And let's take a look at the broader picture. This is a year-to-date chart of the S&P 500. Now we had these four up days, and now we have this big down day.

And I'll tell you what, guys. The market is basically consolidating. And this trend line here has been respected. Any time it gets overbought, it's a sell signal. Any time it gets down here and it's oversold, it's a buy signal. So this has been noise. But when we've seen these dramatic events, whether it's a hot inflation print or the Fed or Chair Powell saying, I told you so, we are really going to hike until something breaks, we have seen these moves before, and they tend to break existing support lines.

So the net result is, if we end up higher in the market in a couple of days, I will say this has been a successful experiment. But I'll tell you what, guys. I have seen odds for a 100 basis point rate hike. That would be 1.0 percentage points baked into the market, 1/4%, or actually, 25%. Here is the 13-week T-bill yield. That is up screaming higher 18 basis points. That is a huge move on the short end of the curve, and even the longer end of the curve moving up as well, but not as much.

So we are in a curve flattening situation. In other words, there are a lot of orange flashing lights here. And if you need to anything else, all the megacap sectors-- that is tech, consumer discretionary, communication services-- all of those are down by 2 and 1/2% to 3%. And I'll just show you one more thing here. Here's our leaders board. ARKK components, those disruption components, as that yield curve shifts higher, down 6%. Very much a risk-off scenario here, guys.