Inflation Report Hit Real Estate Stocks Hardest

US stocks fell Wednesday on worries that what seemed like a blip in the battle to bring down inflation is turning into a trend.

• The S&P 500 fell 49.27 points, or 0.9%, to 5,160.64.
• The Dow Jones Industrial Average fell 422.16 points, or 1.1%, to 38,461.51.
• The Nasdaq composite fell 136.28 points, or 0.8%, to 16,170.36.

Traders pulled back on bets for coming cuts to interest rates by the Federal Reserve following a third straight inflation report that came in hotter than expected. The yield on the 10-year Treasury jumped to 4.55%.

The report was the third in a row to suggest progress on bringing high inflation down may be stalling. For shoppers, that's painful because of the potential for even higher prices at the store. For Wall Street, that's painful because it could convince the Federal Reserve to hold back on delivering the cuts to interest rates that traders are craving and have been betting on. Traders now see a 17% chance that the Fed could begin cutting rates in June, down from nearly 74% a month ago, according to CME Group's FedWatch tool. "Two data points don't make a trend, but maybe three do," says Brian Jacobsen, chief economist at Annex Wealth Management. "If we get one more reading like this, Fed chatter will shift from when to cut to whether to hike."

Wall Street's biggest losers included real-estate investment trusts, utility companies, and other stocks that tend to get hurt most by high interest rates, the AP reports. Real-estate stocks in the S&P 500 fell 4.3% for the biggest loss by far among the 11 sectors that make up the index. That included a 6.1% drop for office owner Boston Properties and a 5.2% tumble for Alexandria Real Estate Equities.

story continues below

Big US companies are lining up on the runway to say how much profit they earned during the first three months of the year, and Delta Air Lines helped kick off the reporting season by delivering stronger-than-expected results. The airline said it's seeing strong demand for flights around the world, and it expects the strength to continue through the spring. Its stock climbed as much as 4% during the morning before flipping to a loss of 2.3%. The banking industry will soon take the spotlight in earnings season, with JPMorgan Chase and Wells Fargo among those reporting on Friday.

(More stock market stories.)