(Bloomberg) -- Investors dumped real estate stocks after a hotter-than-expected US inflation reading quashed expectations for an imminent break from elevated interest rates. 

An index of real estate shares lost more than 4% on Wednesday, posting its worst day since mid-2022. The industry finished as the weakest group in the S&P 500 Index on the day as well as for the month of April. Utilities also took a beating Wednesday as the report on consumer prices led traders to anticipate fewer Federal Reserve interest-rate cuts this year, a serious headwind for sectors tied to borrowing costs.

“Absent a geopolitical shock, utilities and real estate stocks may be in a holding pattern after today’s drawdown,” said Joe Gilbert, portfolio manager at Integrity Asset Management LLC. 

Losses in real estate were largely led by commercial real estate companies. Real estate investment trusts SBA Communications and Extra Space Storage Inc. were the biggest drags on the sector by percentage. Regional bank shares also tumbled, led by Valley National Bancorp, New York Community Bancorp and Provident Financial Services.

Meanwhile, a gauge of utilities shares was down 1.7% on the day. 

“For utilities, it’s a double whammy — one, they are heavily leveraged so their borrowing costs will stay elevated,” said Keith Lerner, chief market strategist at Truist Advisory Services, which is underweight real estate and utilities. “Secondarily, higher interest rates mean cash remains an attractive alternative relative to utilities.”

--With assistance from Bre Bradham.

(Updates for market close.)

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