What happened

Amazon (AMZN -1.54%)Shopify (SHOP -2.19%), and MercadoLibre (MELI -4.21%) were all diving today after the September Consumer Price Index (CPI) came in hotter than expected.

Wall Street was eagerly anticipating the report, as the inflation number is one of the biggest factors impacting the Federal Reserve's decision on interest rates. With the month-over-month CPI up 0.4%, its fastest growth in three months, and the year-over-year number still high at 8.2%, it's clear that inflation continued to be a problem for the economy in September.  

Core inflation, which excludes the more volatile categories of food and energy, was up 0.6% from August and 6.6% on a year-over-year basis, its highest mark in 40 years. That's a sign that even more stable categories like shelter, where prices increased 0.7% in just a month, are experiencing extraordinarily high inflation.

Rising interest rates are particularly challenging for growth stocks because it makes profits in the future less valuable by pushing the discount rate up in financial models. Inflation and an increased risk of recession are also problematic for companies that depend on consumer spending, such as this group of e-commerce stocks.

While the broad market fell on the CPI report, all three of these stocks sunk even further.  

As of 10:42 a.m. ET, Amazon stock was down 3.9%; Shopify had fallen 5%; and MercadoLibre stock was off 5.2%. At the same, the Nasdaq was down 1.7%.

So what

Amazon stock has struggled through much of the year, facing difficult comparisons with its strong growth earlier in the pandemic, and as consumer spending has shifted back to services like travel and restaurants. Reports recently emerged that the company is closing or cancelling dozens of warehouses, a sign it overinvested in capacity during the pandemic.

The company also entered the third quarter with inventory levels up 58%, which may have been part of the reason for Amazon's second Prime Day in October, as it needs to clear inventory ahead of the holiday season. Early results from the selling holiday shows sales were disappointing, as they trended similarly to a normal day.

The CPI report makes it more likely that the Fed will increase the benchmark federal funds rate by another 75 basis points at its next meeting, further tightening the economy ahead of the crucial holiday season. High inflation in areas like rent could also cool off holiday shopping on Amazon for some consumers.

Shopify has faced similar challenges to Amazon. The stock has plunged roughly 85% from its peak nearly a year ago as growth has slowed dramatically from the heady early days of the pandemic and its profits have disappeared. Meanwhile, Shopify laid off 10% of its staff in July, overhauled its management team in September, and executed an oddly timed stock split in June after shares had already plunged.

Investors are also concerned that Amazon's new Buy with Prime program, which allows Shopify sellers to offer Prime shipping directly on their website, will take away a valuable income stream from Shopify. Sticky inflation is also a challenge for the company heading into the holiday season, as many of its sellers sell discretionary items, which tend to do better when the economy is strong.

Finally, MercadoLibre is a Latin American e-commerce company, so it's not directly exposed to the U.S. economy the way Amazon and Shopify are, but there are still several reasons why the CPI report is weighing on the stock.

First, higher U.S. interest rates are likely to make the U.S. dollar even stronger and Latin American currencies weaker, affecting MercadoLibre's reported results. Second, since the stock is valued on future earnings, a higher interest rate makes those earnings worth less. Lastly, a U.S. recession could easily spill over into Latin America and the rest of the globe.

MercadoLibre's results have been more resilient than its U.S. e-commerce counterparts in recent quarters, but the macroeconomic situation has still weighed on the stock, which is down close to two-thirds from its peak last year.

Now what

All three of these stocks still look well positioned for long-term growth, but investor attention is squarely on interest rates and the macroeconomic environment. That's understandable, given the rising risk of a recession.

What that means for investors is that these stocks could continue to face headwinds while interest rates and inflation remain elevated and are likely to be volatile. Over the long term, however, they still look like good bets to outperform.