The stock market had a rough day on Tuesday as investors reacted to tough words from Federal Reserve Chairman Jerome Powell and rising producer costs.
The Dow Jones Industrial Average dropped nearly 400 points, or 1.5%, while the S&P 500 and Nasdaq Composite both fell 1.2%. The losses came after Powell said the central bank was in no rush to raise interest rates, and warned about rising inflation.
At the same time, producer costs rose in May, with the producer price index climbing 0.6%. The increase was the largest since February and was driven by higher energy costs.
The combination of Powell’s comments and the producer price index data weighed on the market, as investors worried about higher inflation and the potential for the Fed to start raising rates sooner than expected.
The market also reacted to news that the White House is considering tapping the Strategic Petroleum Reserve to help lower gas prices. The move could be seen as a sign that the administration is worried about the impact of higher energy costs on the economy.
In other news, the U.S. trade deficit widened in May as exports fell and imports rose. The deficit rose to $68.3 billion, up from $67.1 billion in April.
The trade data could add to worries about the impact of tariffs on the economy. The Trump administration has imposed tariffs on a variety of goods, including steel and aluminum, in an effort to reduce the trade deficit.
Overall, it was a tough day for the markets as investors reacted to the combination of tough Fedspeak and rising producer costs. With the potential for higher inflation and the possibility of more tariffs, investors may remain cautious in the days ahead.