Stocks slid Tuesday after the January consumer price index report showed that inflation grew at a 6.4% annual rate, slightly higher than expected.
The DOW Jones Industrial Average fell 202 points, or 0.58%. The S&P 500 slipped 0.62%, and the Nasdaq Composite ticked 0.80% lower. Treasury yields ticked higher.
The consumer price index rose 0.5% for the month, which translated to an annual gain of 6.4%. That was slightly higher than economist estimates of the basket of goods and services rising 0.4% on the month and 6.2% on the year, according to a survey by Dow Jones. In addition, the December report was revised to show a slight gain instead of a decline.
JPMorgan’s trading desk estimated that an annual hike of 6.4% to 6.5% would result in an S&P 500 loss of roughly 1.5% on Tuesday before the amount was made public. It was better than worst-case scenarios of a 6.5% or higher annual increase, an acceleration of inflation that would have caused a 2.5% drop in the S&P 500.
Overall, the data was better than anticipated, but it is unlikely to convince the Fed to abandon its tightening drive.
While there were no significant shocks in today’s CPI figure, Mike Loewengart, head of model portfolio construction at Morgan Stanley Global, said that while inflation has peaked, it may take some time before it begins to decrease to normal levels investment company.
With the labor market as tight as it is right now, he continued, “the issue remains whether inflation will be able to fall below the Fed’s goal levels.” That might be the prescription for a soft landing, but it’s unclear when the Fed will stop raising interest rates and whether the labor market will become less resilient.
All three major indexes ended Monday’s session with gains of more than 1%, giving stocks a boost. Comparatively, the Nasdaq Composite and S&P 500 declined last week.
their poorest weekly results since December.
Investors will also be keeping an eye on earnings for clues about consumer health in addition to the CPI.