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Stocks slid Tuesday after the January consumer price index report showed that inflation grew at a 6.4% annual rate, barely higher than expected.
The Dow Jones Industrial Average fell 146 points, or 0.48%. The S&P 500 slipped 0.40%, and the Nasdaq Composite traded 0.42% lower. Treasury yields ticked higher.
The buyer price index rose 0.5% for the month, which translated to an annual gain of 6.4%. That was barely higher than economist estimates of the basket of products and services rising 0.4% on the month and 6.2% on the yr, in line with a survey by Dow Jones. As well as, the December report was revised to point out a slight gain as a substitute of a decline.
Before the number was released, JPMorgan’s trading desk predicted that an annual increase of 6.4% to six.5% would trigger an S&P 500 lack of about 1.5% on Tuesday. It was higher than worst fears of a 6.5% or greater annual increase, an acceleration in inflation that might have triggered an S&P 500 decline of two.5%, JPMorgan predicted.
The report was largely higher than feared, but at the identical time unlikely to cause the Fed to back off from its tightening campaign.
“While there have been no major surprises in today’s CPI reading, it’s a reminder that while inflation has peaked it might be some time before we see it moderate to normal levels,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment office.
“The query stays if inflation will have the opportunity to fall to the Fed’s goal levels with the labor market as tight because it currently is,” he added. “That might be the recipe for a soft landing, but it surely stays to be seen when the Fed will shift away from rate hikes and if the labor market will lose its resiliency.”
Stocks are coming off a positive session, with all three major indexes ending Monday’s session up greater than 1%.
Beyond the CPI, investors may also be waiting for earnings for insights into the health of the buyer. Kraft Heinz, Boston Beer and DoorDash are all scheduled to report this week.
