Dow craters 1,276 points as stocks notch their worst day since June 2020 after hot inflation reading

"A 100 basis point move is again within the realm of possibility," said economist Peter Earle, referring to the upcoming Fed meeting next week.

• Stocks crashed Tuesday following the hotter-than-expected August inflation report. 
• August CPI showed inflation rose 8.3% compared to the same month last year.
• The new data signals that the Federal Reserve is likely to deliver more outsized rate hikes.

US stocks plunged Tuesday following the hotter-than-expected August inflation report. The Dow Jones Industrial Average fell more than 1,200 points to notch its worst day since June 2020. 

August CPI revealed inflation rose 8.3%, compared to the same month in 2021. That is lower than July's 8.5% but higher than the expected 8.1%. The hot reading comes despite falling gas prices.

Core CPI, which doesn't include volatile energy prices and food, increased 6.3% compared to August last year. 

July's CPI reading was 8.5%, and was 9.1% in June, which was the highest level in four decades. 

"One thing was clear after today's report - Treasury Secretary Yellen clearly didn't get a sneak peek at the data," said Michael Reinking, senior market strategist at the New York Stock Exchange. "Today's data was disappointing especially related to core inflation which showed widespread gains across components."

Tuesday's session marked the seventh  one-day drops of 4% or more this year so far. There were zero in 2021, and 10 in 2020, according to Bespoke Investment Group.

Here's where US indexes stood as the market closed 4:00 p.m. on Tuesday: 

• S&P 500: 3,932.63, down 4.33% 

• Dow Jones Industrial Average: 31,104.90, down 3.94% (1,276.44 points)

• Nasdaq Composite: 11,633.57, down 5.16%

Bridgewater's co-chief investor said the US is at the center of a global financial bubble, and warned that a crushing recession is in the cards. 

JPMorgan's Marko Kolanovic said now is the time to buy stocks since inflation will resolve itself and the global economy will avoid a downturn.

The US is bracing for railroad strikes, but according to Goldman Sachs, markets shouldn't view that as "black swan" event, given that the labor market is extremely tight.

European ministers are slated for an emergency meeting this month for talks on lowering energy costs across the EU. European Commission President Ursula von der Leyen is expected to unveil proposals aimed at bringing down high prices on Wednesday, Reuters reported.

Asian utilities are stockpiling fuel oil as natural gas shortages have boosted demand for dirtier energy alternatives. In August, Japan's fuel-oil purchases hit a four-year high, for example.

Meanwhile, Saudi Arabia's sovereign wealth fund added a $412 million bet on tourism, as it acquired a 30% stake in Almosafer Travel & Tourism. 

Oil prices slipped, with West Texas Intermediate down 0.11% to $87.68 a barrel. Brent crude, the international benchmark, inched lower 0.49% to $93.53 a barrel. Crude prices could find a floor around $80 a barrel as the Biden administration reportedly considers buying oil to refill the strategic petroleum reserve. 

Gold edged lower 1.57% to 1,713.30 per ounce. The 10-year yield jumped higher 0.58 basis points to 3.422%.

Bitcoin dropped 9.71% to $20,237.73.