Magnificent 7 Lose More Than $250 Billion As Blazing Inflation Data Triggers Market Sell-Off

The Magnificent Seven stocks experienced a sharp plunge in market value Tuesday, shedding over $250 billion in value a single session as hotter-than-expected inflation data sparked a widespread sell-off in U.S. stocks.

The group, which includes heavyweights Microsoft Corp. MSFT, Apple Inc. AAPL, Alphabet Inc. GOOG GOOGL, Amazon Inc. AMZN, Meta Platforms Inc. META, NVIDIA Corp. NVDA and Tesla, Inc. TSLA, saw its collective market capitalization dip below the $13-trillion mark.

Microsoft bore the brunt of the market-cap decline, with nearly $75 billion wiped out in just one session. Tesla recorded the day’s worst stock performance among the Magnificent Seven with a 2.9% drop.

Magnificent 7 Price Action, Market Cap Plunge

Hot Inflation Report Sparks Market Reset

Heading into the January inflation report, major stock indexes were flirting with record highs, buoyed by relatively benign expectations from Wall Street economists.

The consensus among economists called for a drop in annual inflation to 2.9%, which would have been the lowest in nearly three years, and anticipated a fall in core inflation to 3.7%.

Contrary to these expectations, inflation rates came in higher than anticipated. January’s headline CPI inflation rose to 3.1% year-over-year, while the core inflation unexpectedly hit 3.9%.

The higher-than-expected inflation readings dimmed hopes for imminent Federal Reserve rate cuts, pushing expectations for a substantial cut out to July 2024. As a result, the number of rate cuts the market is anticipating in 2024 has decreased to four, a significant reduction from the seven cuts projected just a month earlier.

This sudden shift in expectations for Federal Reserve rate cuts sent tremors through the financial markets Tuesday. The S&P 500, as represented by the SPDR S&P 500 ETF Trust SPY, tumbled 1.6%, marking its worst performance in nearly a year. Similarly, the Nasdaq 100, tracked by the Invesco QQQ Trust QQQ, fell about 2%.

Compounding the day’s negative sentiment, none of the 11 S&P 500 sectors managed to post gains on Tuesday, with the interest-rate-sensitive real estate sector bearing the brunt of the sell-off.

In response to the inflation news, Treasury yields soared, reflecting growing skepticism among investors about the Federal Reserve’s willingness to push through aggressive rate cuts this year. The 10-year yield climbed past 4.3%, reaching its highest point since early December 2023.

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