• US stocks plunged on Wednesday after another higher-than-expected inflation print. 
  • The three major averages dropped, with the Dow losing over 400 points.
  • Odds of a June rate cut have been slashed as the Fed looks poised to continue its inflation fight.

US stocks plummeted on Wednesday as markets took in a hotter-than-expected inflation report and the latest Federal Reserve meeting minutes, causing traders to push back on their expectations for Fed rate cuts this year.

All three benchmark indexes ended the trading session lower, with the Dow Jones Industrial Average sliding over 400 points. Bond yields soared, with the 10-year US Treasury spiking 18 basis points to 4.546%.

Inflation rose 3.5% on an annual basis in March, slightly hotter than the 3.4% increase economists were expecting. Core inflation, which excludes volatile food and energy prices, grew 3.8% year-per-year, hotter than the expected 3.7% increase.

Inflation has come in higher than expected for the past three months, which has undercut investors' expectations for Fed rate cuts this year. Odds of a June rate cut have fallen to 16%, according to the CME FedWatch tool, down from 56% odds priced in on Tuesday.

Bank of America maintained its outlook for a June rate cut but said it had "low confidence," given the latest CPI data. Barclays revised its outlook to just one 25 basis-point rate cut later this year, down from its initial forecast of one rate cut every other month. Goldman Sachs said it was adjusting its view to two cuts from three, as insurance costs keep inflation running hot. 

"The Federal Reserve will have to wait even longer for evidence confirming that gains in fighting price pressures are durable before it turns accommodative," José Torres, a senior economist at Interactive Brokers, said in a statement. "Today's report reflects that progress on inflation has reversed, with goods and commodities turning from a disinflationary friend to an inflationary foe."

As of last month's policy meeting, Fed officials were still projecting three rate cuts to come in 2024. But newly released minutes of the Fed's March policy meeting show that central bankers remain cautious on the recent uptrend in inflation.

Officials commented on "disappointing" inflation readings over the past several months, adding they "did not expect it would be appropriate" to lower rates until there was greater confidence inflation was back on track to reach 2%, the minutes said. 

"The Fed always puts more weight on backward-looking data, and this Fed, in particular, is still scarred by the 'transitory' inflation fiasco," Ian Shepherdson, the chief economist of Pantheon Macroeconomics said in a note on Wednesday. "The risk that the Fed waits too long and moves too slowly is rising."

Here's where US indexes stood at the 4 p.m. closing bell on Wednesday: 

Here's what else happened today: 

In commodities, bonds, and crypto: 

  • West Texas Intermediate crude oil climbed by 1.21% to $86.26 a barrel. Brent crude, the international benchmark, ticked higher 1.25% to $90.54 a barrel. 
  • Gold slipped 1.05% to $2,328.30 per ounce. 
  • The 10-year Treasury yield jumped 18 basis points to 4.546%%. 
  • Bitcoin rose 0.86% to $69,397. 
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