Equities plummeted on Tuesday following a much hotter than expected reading of the CPI. The CPI came in hotter than expected in all comparisons belying the idea that consumer inflation had peaked which puts increased pressure on the FOMC to act. The news not only points to hot inflation but an acceleration at the consumer level that may not be finished. The FOMC is meeting next week and has been indicating a willingness to fight inflation that could lead to another 75 basis point hike or more. The odds of a 75 basis point hike hit 100% following the CPI news and the CMEs FedWatch Tool is pricing in a 35% chance for an historically high 100 basis point interest rate hike.

The takeaway from the news is far-reaching and ends with the earnings outlook for the S&P 500. Inflation is cutting into the bottom line for most companies and FOMC interest rate hikes are going to cap business and other economic activities which means lower revenues and lower earnings. The bottom line is the hurricane predicted by Jamie Dimon last spring is now upon us and it looks like it's a bad one.