Hot CPI shock: 8.3% beats 8.1% estimate, S&P 500 drops 4.3%

The August 2022 CPI report released September 13 printed 8.3% headline vs 8.1% expected, and 6.3% core vs 6.1% expected. Core CPI reaccelerated sequentially to 0.6% MoM, double the expected pace. The composition was decisive: shelter (+0.7% MoM), medical services, and core services ex-shelter all accelerated, while goods disinflation continued. The print destroyed the "inflation has peaked" narrative that had dominated August.

Markets imploded on the release. The S&P 500 fell 4.32%, its worst single session since June 11 2020, wiping out a weeklong rally. Every sector declined. Growth stocks led lower as terminal rate expectations repriced 40 bps higher in a single session, with Fed funds futures pricing a 100% chance of 75 bps at the September 21 FOMC and a meaningful 34% probability of 100 bps. The 2Y Treasury yield surged to 3.75% from 3.56%, and the 10Y jumped to 3.42%.

The session recalibrated 2022's inflation fight. Core services and shelter stickiness meant goods disinflation alone could not reverse the headline trend. The Fed responded with its third consecutive 75 bp hike September 21 and an updated dot plot showing the terminal rate near 4.60% (raised from 3.80% in June). The September 13 print remains one of the most violent single-session equity reactions to a data release in the post-GFC era.