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The stock market tanked on Wednesday after the Labor Department reported inflation unexpectedly surged to new highs in June, adding to already widespread recession fears as investors believe the Federal Reserve will have to get more aggressive about raising interest rates to tame surging consumer prices.


Markets opened lower: The Dow Jones Industrial Average fell 1.1%, over 300 points, while the S&P 500 lost 1% and the tech-heavy Nasdaq Composite 1%.

Consumer prices rose 9.1% in the 12 months ending in June—surpassing the 8.8% increase that experts were forecasting—as inflation now sits at a new 40-year high, up significantly from the 8.6% recorded in May.

Core CPI, which excludes volatile food and energy prices, came in at 5.9%—up from 5.2% the month prior and above the 5.7% Wall Street analysts were expecting.

Experts speculate that the latest inflation data will strengthen the Federal Reserve’s resolve to continue aggressively raising interest rates: The majority of traders now expect the central bank will hike rates at its upcoming meeting this month by at least 75 basis points, according to CME Group data .

Rates on government bonds surged following the inflation data and the yield curve inverted further, with the two-year Treasury yield jumping to 3.16% on Wednesday, higher than the ten-year rate which sits at just over 3%.

Investors also continued to monitor corporate earnings—with some analysts predicting a slowdown amid recession fears, as shares of Delta Air Lines fell over 7% after reporting solid profits but a big jump in costs.