Stocks declined on Tuesday following hotter-than-anticipated inflation data for January, which caused Treasury yields to surge and prompted concerns about the Federal Reserve’s ability to implement multiple rate cuts this year, a pivotal aspect of the bullish scenario for the stock market.
The Dow Jones Industrial Average dropped 24 points, equivalent to a 1.1% decrease. The S&P 500 experienced a 1.3% decline, while the Nasdaq Composite saw a 1.9% downturn.
The consumer price index (CPI) increased by 0.3% in January compared to December figures. On an annual basis, CPI rose by 3.1%. Economists surveyed by Dow Jones had anticipated a 0.2% month-on-month increase in CPI for January and a 2.9% rise from the previous year.
Core prices, excluding volatile food and energy components, surged by 0.4% month over month and 3.9% from a year earlier. Projections had indicated a 0.3% increase in Core CPI for January and a 3.7% rise from the previous year.
“This could serve as a convenient justification to temper some of the exuberance in the market, which has been consistently bullish so far this year,” noted Art Hogan, chief market strategist at B. Riley Financial.
“The CPI data released today slightly exceeded expectations, underscoring that we’re not on a linear trajectory but rather on a downward path.”
The 2-year Treasury yield surged above 4.6%, and the 10-year yield exceeded 4.27% following the CPI data release.
Technology shares, including Nvidia, Microsoft, and Amazon, which had spearheaded the market’s ascent to record highs amid declining rates, led the losses in early Tuesday trading. Amazon experienced a 3% decline, while Nvidia and Microsoft each fell 2%.
Wall Street wrapped up a mixed session, with the Dow achieving a record-high close, while the S&P 500 and Nasdaq ended the day slightly lower. All three major indices are on a five-week winning streak.
In corporate developments, JetBlue Airways soared 12% after activist investor Carl Icahn disclosed a nearly 10% stake in the airline. However, toymaker Hasbro saw a 2% decline after falling short of analyst expectations for the fourth quarter. Meanwhile, shares of Avis Budget Group retreated 10% following disappointing fourth-quarter revenue figures.
