Dow plummets 500 points as market jitters return following a dreadful inflation report.

                Dow plummets 500 points as market jitters return following a dreadful inflation report.

The Dow Jones Industrial Average (DJIA), sometimes known as Dow Jones or just the Dow, is a price-weighted stock market index comprised of 30 important businesses listed on US stock exchanges.

On Thursday, the stock market plummeted after a worse-than-expected inflation reading—consumer prices rose 7.5 percent in January—raised investor fears that the Federal Reserve might tighten monetary policy too rapidly, sending markets into a downward spiral.

The market had risen in the days leading up to the release of the latest inflation statistics, and tech companies, in particular, had made a strong comeback this week. Stocks have been unable to find a direction this February, moving slightly higher following the market's worst start to the year since 2009. Last month's broad selloff resulted in the market's worst start to the year since 2009. January's blistering inflation reading will almost certainly signal to investors that the Federal Reserve will continue to hike interest rates and remove stimulus rapidly, a notion that has sent yield rates soaring.

The Dow Jones Industrial Average dropped almost 500 points to 1.4 percent, while the S&P 500 dropped 1.8 percent and the tech-heavy Nasdaq Composite dropped 2.1 percent.

The Labor Department said that inflation jumped 0.6 percent in December, a higher rate than last month and higher than the 0.4 percent economists expected, mainly to broad increases in food, electricity, and shelter prices.

Consumer prices have risen by 7.5 percent in the last year, and are still above 40-year highs.

Government bond yields soared as a result of the scorching inflation data: On Thursday, the ten-year Treasury note briefly surpassed 2%, its highest level since August 2019 and up from 1.5 percent in December.

Following the inflation statistics, Big Tech and other growth sectors were hit hard, with Amazon and Microsoft each losing 1% or more, while bank stocks rallied on the potential of increased interest rates.

However, positive earnings reports from a number of firms helped minimize the market's losses: Disney surged more than 3%, and Coca-Cola gained about 1%.

Last week, Fed Chair Jerome H. Powell confirmed a plan to hike interest rates "soon," most likely in March. However, he provided little details on how high the interest rates would have to go or what the Fed would do with the trillions of dollars in bonds it has purchased to boost the economy over the last two years.