U.S. Stocks Slump as Inflation Fears Persist
U.S. stocks took a hit yesterday as the latest consumer inflation data raised concerns about the ongoing battle against rising prices. The Nasdaq Composite suffered a notable drop of 1.45%, while the Dow and the S&P 500 also saw losses of 1.19% and 1.20% respectively. Notably, all 11 sectors of the S&P were in the red, with rate-sensitive stocks taking the biggest hit.
The data that spooked investors revealed that the Consumer Price Index (CPI) for all items rose by 0.3% in January compared to the previous month, exceeding the estimated 0.2% increase. This marked the largest jump since September of last year. On an annualized basis, the CPI was up by 3.1% year-over-year, significantly higher than the Federal Reserve’s target of 2%.
Furthermore, the core CPI, which excludes food and energy prices, came in even higher at 0.4% on a monthly basis. This data had an immediate impact on expectations for a potential interest rate cut. The odds of a 25 basis point rate cut by the Federal Reserve’s committee in March dropped to around 9%, down from 16% just a day earlier.
Notably, core services inflation surged by 0.7%, marking the largest gain in 16 months. This was driven by increased price growth in areas such as owners’ equivalent rent, medical care services, and travel services.
The concerns around inflation also sparked action in the U.S. Treasury market, with yields hitting their highest levels of the year. The 30-year yield rose by 7 basis points to reach 4.44%, while the 10-year yield increased by 11 basis points to 4.28%. The 2-year yield saw the largest jump of 14 basis points, reaching 4.61%.
Amidst these developments, several companies also felt the heat. Hasbro, a prominent toy manufacturer, experienced a significant decline in its stock price after reporting disappointing sales and earnings in the holiday quarter. Biogen, a leading biotech company, also faced losses after indicating a drop in annual revenue. Finally, Marriott International reported mixed quarterly results, adding to the volatility of the market.
The uncertainties surrounding inflation and the potential impact on the economy have undoubtedly made investors wary. As the battle against rising prices wages on, market participants will be closely watching further developments to gauge the Fed’s response and its implications for future market performance.
Analyst comment
Negative news: U.S. Stocks Slump as Inflation Fears Persist
As an analyst, I anticipate that the market will continue to be volatile and cautious as investors assess the impact of rising inflation on the economy. Further developments will be closely watched to determine the Federal Reserve’s response and its implications for future market performance.
