Wall Street's main indexes were down about a third of a percent on Tuesday, falling for the first time in three sessions as caution crept in ahead of crucial data on inflation, which has been the root cause of the recent sell-off.
A strong reading on U.S. consumer price data on Wednesday could fan fears over rising inflation and faster interest rate hikes - the same worries that sparked the sell-off after strong jobs data on Feb. 2.
“I expect a continued stream of volatility, driven by uncertainty among investors with fears of accelerating rates. I don’t think that’s going away any time soon,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
Cleveland Fed president Loretta Mester, a voting member in the central bank’s rate-setting committee this year, said inflation should gradually rise this year, but not at a rate that requires a faster Fed reaction in terms of raising rates.
She said the recent stock market sell-off and jump in volatility will not damage the economy’s overall strong prospects.