As soon as the U.S. Consumer Price Index (CPI) report was released Thursday morning the selling frenzy began on Wall Street in the futures market and rolled right into the equities session.

The Dow at one point was down more than 500 points on the inflation data with the Nasdaq and S&P 500 hemorrhaging alongside. The Nasdaq dropped 2.80% in early trading and the S&P 500 lost 2.10% on the CPI news.

September numbers for CPI show a .4% increase from the previous month and 8.2% higher in the year-over-year tally. Both are higher than economists expected. CPI measures consumer expenses for staples such as housing, gasoline, utilities, and food. 

CPI inflation data gets worse for Fed, traders

A bigger concern for traders is the rate of core inflation which is what the Federal Reserve (Fed) monitors closely for monetary policy actions.

Core inflation climbed .6% over already high August numbers and spiked to 6.6% year-over-year. Core inflation measures rising costs, less food, energy, and trade services.

These ongoing, elevated inflation rates have not been seen since big hair and acid-washed jeans were in style in the ‘80s.

After months of hawkish actions based on lagging economic data, the Fed has failed to stop this record high inflation.

Core inflation is the measure for how aggressively the Fed continues raising benchmark interest rates. The Fed staunchly touted in recent weeks its aggressive resolve to lower annual core inflation down to 2%.

The September PPI numbers – now at 6.6% annually – show core inflation at more than triple the Fed acceptable level.

Homebuyers, consumers face record inflation

Within the CPI data for September are some stark news for homebuyers and consumers.

Despite slightly lower housing prices across the nation, potential buyers are backing off purchases due to mortgage rates reaching 7% for the highest rate in 20 years. Buyers also face tightening loan qualifications and higher monthly payments with each jump in rates.

CPI data shows consumers are struggling with annual inflation for groceries (up 13%), shelter (up 6.6%), rent (up 6.7%), energy (up 19.8%), gasoline (up 18.2%), electricity (up 15.5%), new vehicles (up 9.4%), used vehicles (up 7.2%), transportation services (up 14.6%), and medical care services (up 6.5%).

According to the CPI report, the food at home index rose 13% over the last 12 months. The index for cereals and bakery products increased 16.2% over the year and the index for dairy and related products rose 15.9%. The remaining major grocery store food groups posted increases ranging from 9% (meats, poultry, fish, and eggs) to 15.7% (other food at home).

These rising costs factor into what consumers can buy within their budgets, and the less consumers buy the more it affects profit margins (and stock prices) of retailers and service providers. The stock market then feels the inflation pain.

This becomes an issue for traders trying to navigate an inflation-influenced stock market.