US sharemarkets fell sharply on Wednesday after new economic data and comments from the Federal Reserve heightened concerns about persistent inflation. The Dow Jones Industrial Average dropped 768 points, or 1.63%, to close at 46,225.15, its lowest level of the year. The S&P 500 declined 1.36% to 6,624.70, while the Nasdaq Composite fell 1.46% to 22,152.42.
The sell-off followed a stronger-than-expected rise in wholesale prices, with the producer price index increasing 0.7% in February, well above forecasts. The data reinforced concerns that inflation pressures remain elevated.
Oil surge adds to market pressure
Energy prices continued to rise, adding to concerns about inflation and economic growth. Brent crude climbed 3.83% to settle at US$107.38 a barrel, while West Texas Intermediate crude closed at US$96.32.
The gains came amid escalating tensions in the Middle East, including reported strikes on key Iranian energy infrastructure and retaliatory attacks on regional facilities. Shipping and energy supply disruptions linked to the Strait of Hormuz continue to drive volatility in oil markets.
The combination of higher energy costs and inflation has raised concerns about a potential stagflationary environment.
Federal Reserve holds rates
The Federal Reserve left interest rates unchanged at 3.5% to 3.75% and acknowledged that developments in the Middle East are adding uncertainty to the economic outlook. Chair Jerome Powell said inflation is expected to ease, but at a slower pace than previously anticipated.
Markets are now reassessing the path of interest rates, with expectations for policy easing becoming less certain.
Australian market outlook
Australian shares are set to open sharply lower, tracking losses on Wall Street and the surge in oil prices. ASX 200 futures were down 149 points, or 1.7%, to 8,540.
Locally, attention will turn to the February labour force report, due at 11.30am AEDT, with the unemployment rate expected to remain steady. Overseas, investors will monitor policy decisions from the Bank of England and the European Central Bank.
