Ford Motor (NYSE: F) stock sank 4.2% within minutes of the market's opening Tuesday, reversing its gains from the previous day as the markets digested the latest inflation data and tried to make sense of what it could mean for the economy and automotive companies that are highly sensitive to inflation and interest rates. 

The S&P 500 plunged today after the August Consumer Price Index (CPI) unexpectedly rose 0.1% versus July, despite a fall in gasoline prices. Economists expected a 0.1% drop in the CPI for August. Also, although inflation dropped year over year in August, it still remains sky-high at 8.3%, significantly overshooting the Federal Reserve's annual target inflation of 2%.

This inflation report was crucial as the Federal Reserve heads for a meeting next week to announce its next interest rate hike. Stubborn inflation now means the Fed will most likely hike interest rates by a big margin yet again next week – economists now see a 75-basis point hike imminent – and in doing so, refuel the chances of the economy slipping into a recession.

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Source Fool.com