• US stocks tumbled on Wednesday as traders took in hotter-than-expected inflation.
  • Consumer prices rose 3.8% year-per-year in March, higher than what economists had expected.
  • The odds of a June Fed rate cut have been completely wiped off of the table, according to the CME FedWatch tool.

US stocks dropped on Wednesday as traders took in a hotter-than-expected inflation report and repriced their expectations for Fed rate cuts this year. All three benchmark indexes fell early Wednesday, with the Dow Jones Industrial Average losing over 450 points.

Bond yields, meanwhile, surged higher. The 10-year Treasury yield rose 10 basis points to 4.474%. 

Inflation continued to accelerate in March, with consumer prices unexpectedly rising 0.4% for the month and 3.5% year-per-year. Core inflation, which excludes volatile food and energy prices, also accelerated 3.8% year-per-year, higher than the 3.7% print economists had expected.

Stubborn inflation is fueling fear that the Fed could keep interest rates higher for longer, though investors had initially priced in hefty rate cuts at the start of the year. Markets are now pricing in just a 6% chance the Fed could cut interest rates by 100 points or more this year, down from a 61% chance priced in a month ago, according to the CME FedWatch tool.

Meanwhile, the odds of a June Fed rate cut have been completely wiped off the table. Investors are pricing in a 0% chance of a rate cut that month, compared to a 57% chance priced in a month ago.

"You can kiss a June rate cut goodbye," Greg McBride, Bankrate's chief financial analyst, said in a note on Wednesday. "There is no improvement here, we're moving in the wrong direction," he added of inflation.

The latest CPI report may have even dashed the odds of a July Fed rate cut off the table, according to Seema Shah, the chief global strategist at Principal Asset Management.

"This marks the third consecutive strong reading and means that the stalled disinflationary narrative can no longer be called a blip. In fact, even if inflation were to cool next month to a more comfortable reading, there is likely sufficient caution within the Fed now to mean that a July cut may also be a stretch," Shah said in a note.

Here's where US indexes stood shortly after the 9:30 a.m. opening bell on Tuesday: 

Here's what else happened today: 

In commodities, bonds, and crypto: 

  • West Texas Intermediate crude oil climbed by 0.5% to $85.70 a barrel. Brent crude, the international benchmark, jumped 0.6% to $89.92 a barrel. 
  • Gold slipped 1.14% to $2,326.14 per ounce. 
  • The 10-year Treasury yield jumped 10 basis points to 4.474%. 
  • Bitcoin dropped 4.15% to $67,768. 
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