The Dow falls 680 factors in its worst decline since January as buyers are scared by a sizzling inflation charge

US stocks fell sharply on Wednesday as hotter-than-expected inflation data sparked massive selling, particularly in technology stocks.

The Dow Jones Industrial Average fell 681.50 points, or 2%, to 33,587.66, its worst day since January. The blue chip benchmark fell as much as 713 points from its session low. The S&P 500 lost 2.1% to 4,063.04 for its biggest drop since February, while the tech-heavy Nasdaq Composite fell 2.7% to 13,031.68, bringing its weekly drop to more than 5%.

Inflation accelerated last month, at its fastest level since 2008, with the consumer price index up 4.2% yoy, compared with the Dow Jones estimate for a 3.6% increase. The monthly profit was 0.8% versus the expected 0.2%. Excluding volatile food and energy prices, the core CPI rose 3% over the same period in 2020 and 0.9% monthly. The respective estimates were 2.3% and 0.3%.

“Investors who may have been looking for a reason to rebound in a stock market that has risen more than 10% since the beginning of the year found a good reason: rising inflation,” said Chris Hussey, chief executive officer at Goldman Sachs, in one Note.

Investors feared a rebound in inflation as this could depress margins and hurt corporate earnings. If price pressure gets too high over a long period of time, the Federal Reserve would be forced to tighten monetary policy.

“There are people who believe that not only is the Fed behind the curve, they may miss the point and by the time they start catching up it will be too late,” Wall Street veteran Art Cashin told CNBC’s Squawk on Wednesday on “the street.”

Tech stocks, which have been under pressure this week and month, dragged yet again on Wednesday as bond yields jumped. Microsoft, Netflix, Amazon, and Apple stocks all fell more than 2%, while Tesla was down over 4%. Alphabet fell more than 3%.

The strength of the energy fractions, which could do well in an inflationary environment, provided some cushion to the broader market. Occidental Petroleum was up 2.4%. Chevron and Marathon Oil gained slightly.

The Cboe Volatility Index, also known as the Wall Street Fear Measure, fell above 28 at its session high during the stock price on Wednesday. The VIX is a measure of fear, or expected volatility in the markets, calculated from the option prices of the S&P 500 .

The Technology Select Sector SPDR is down 5.6% and 6% this week as investors reevaluate the group’s high valuations amid rising inflation.

– CNBC’s Kevin Stankiewicz contributed to the coverage.

Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews and access to CNBC TV.
Sign in to start a free trial today