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March CPI at 3.5% YoY vs 3.4% estimate

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Bets for June rate cut dwindle

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Fed minutes show worry of stalled inflation progress

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Indexes down: Dow 1.15%, S&P 0.96%, Nasdaq 0.90%

(Updates to 14:13 EDT)

By Stephen Culp

NEW YORK, April 10 (Reuters) - U.S. stocks tumbled on

Wednesday after hotter-than-expected inflation data threw cold

water on hopes the Federal Reserve would enter its monetary

policy easing phase soon.

All three major U.S. stock indexes veered sharply lower at

the opening bell following the Labor Department's Consumer Price

Index (CPI) report, which landed north of consensus and offered

a reminder that inflation's road back down to the Fed's 2%

target will continue to be a long and meandering one.

Minutes from the Fed's March policy meeting reflected

officials' concerns that inflation's progress toward that target

might have stalled, and restrictive monetary policy may need to

be maintained for longer than anticipated.

Equity prices were further pressured by benchmark Treasury

yields, which breached 4.5% to touch its highest level since

November.

Interest rate-sensitive stocks were hardest hit, with real

estate primed for its biggest one-day percentage drop

since June 2022.

Housing stocks were on course for their biggest daily

decline since Jan. 23 and the Russell 2000 was set for

its steepest one-day slide since Feb. 13.

The CPI report "was really important regarding expectations

for Fed rate cuts for the remainder of this year," Thomas

Martin, Senior Portfolio Manager at GLOBALT in Atlanta. "And it

went off according to script; that if there was a meaningful

surprise to the upside, which there was, the markets would react

the way they did."

The CPI data prompted markets to reset expectations

regarding the timing and extent of Fed rate cuts.

Financial markets have now priced in a dwindling 19.3%

likelihood of a 25 basis point rate cut in June, down from 56.0%

just prior to the report's release, according to CME's FedWatch

tool.

"I think a July rate cut is still possible," said Oliver

Pursche, senior vice president at Wealthspire Advisors, in New

York. "There are several key data points that will be coming in

before then, but I would be surprised if A) there was a June cut

and B) if there will be more than two cuts this year."

At 2:13PM ET, the Dow Jones Industrial Average

fell 445.87 points, or 1.15%, to 38,437.8, the S&P 500

lost 49.82 points, or 0.96%, to 5,160.09 and the Nasdaq

Composite dropped 146.25 points, or 0.9%, to 16,160.39.

Of the 11 major sectors of the S&P 500, all but energy were

red, with real estate shares suffering the steepest decline.

Most megacap growth stocks slipped with the exception of

Nvidia Inc, which bucked the trend by rising 1.7%.

U.S.-listed shares of Alibaba ( BABA ) advanced 1.8% after

the company's co-founder Jack Ma released a memo to employees on

expressing support for the internet giant's restructuring

efforts - a rare move from the billionaire who has spent the

last few years away from the spotlight.

Declining issues outnumbered advancing ones on the NYSE

by a 6.84-to-1 ratio; on Nasdaq, a 3.76-to-1 ratio favored

decliners.

The S&P 500 posted three new 52-week highs and 8 new lows;

the Nasdaq Composite recorded 29 new highs and 152 new lows.

Investors will now focus on Thursday's producer prices

report for a clearer picture of March inflation, and the

unofficial kick-off of first quarter earnings season. On Friday,

a trio of big banks - JPMorgan Chase & Co ( JPM ), Citigroup Inc ( C/PN )

and Wells Fargo & Co ( WFC ) - are slated to post results.

Analysts expect aggregate S&P 500 earnings in the first

quarter to grow 5.0% from last year, according to LSEG data.

That is lower than the 7.2% annual earnings growth for the

quarter forecast on Jan. 1.