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Market Snapshot: U.S. stocks erase early tumble following kneejerk reaction to hot January inflation readings

U.S. stock indexes traded near unchanged mid-morning Thursday, erasing losses seen in a knee-jerk reaction to another hotter-than-expected inflation reading.

How are stock-index futures trading?

The Dow Jones Industrial Average
DJIA,
-0.39%

was up 30 points, or 0.1%, at 35,798.

The S&P 500
SPX,
-0.52%

rose less than 0.1% to 4,589.

The Nasdaq Composite
COMP,
-0.51%

edged up 0.1% to 14,507.

The Dow industrials rose 0.9% on Wednesday, with the S&P 500 gaining 1.5% and the Nasdaq jumping 2.1%, marking its best daily percentage gain since Jan. 31, according to Dow Jones Market Data.

What’s driving the markets?

Stocks fell sharply at the opening bell following the inflation data, then bounced off early session lows, but remained under pressure. The year-over-year rate of U.S. inflation climbed again in January to 7.5% and stayed at a 40-year high, suggesting upward pressure on consumer prices is unlikely to relent in the near future. On a monthly basis, the consumer-price index rose 0.6% in January. Economists polled by The Wall Street Journal had forecast a 0.4% gain.

Inflation “was piping hot and now there are greater chances for the Fed to adopt more aggressive policy. In fact, our base case scenario is that by July we may see a full percentage point increase in the interest rate,” said Naeem Aslam, chief market analyst at AvaTrade, in a note.

“There’s still one CPI and PCE (personal consumer expenditures) report each on the docket before the next [Fed policy] meeting” in March, said Jason Pride, chief investment officer of private wealth at Glenmede.

“All else equal, more fuel to the inflation fire should harden the Fed’s resolve to begin raising interest rates at its next meeting in March and introduce quantitative tightening in the months thereafter,” he said, adding that chances of a half-point hike should be viewed as a possibility, though a quarter-point move remains the base case.

And: High inflation has jacked up the cost of food, gas, cars and rent – and there’s little relief in sight

Treasury yields jumped, with the 10-year Treasury note
TMUBMUSD10Y,
2.008%

briefly topping the 2% threshold for the first time since 2019. The rate remained just shy of 2% at 1.992% in recent action, according to FactSet.

The higher-than-expected inflation number is seen maintaining pressure on interest-rate sensitive technology stocks. The Nasdaq Composite suffered its biggest percentage drop in almost two years last month, as well as its worst January in over a decade due to worries over inflation and tighter Federal Reserve monetary policy.

In other data, jobless claims fell 16,000 in latest week to 223,000.

What companies are in focus?

Disney shares
DIS,
+4.39%

climbed after the entertainment giant reported record revenue and a profit of more than $1 billion as it added streaming subscribers than expected over the holidays, theme-park profit surged.

Shares of Coca-Cola Co.
KO,
+1.72%

were up 1.6% after the beverage giant delivered results that topped expectations and saw sales rise.

Twitter Inc.
TWTR,
+1.27%

shares rose 1% after results largely met expectations and the social media company announced a new $4 billion buyback program.

Twillio Inc.
TWLO,
+10.71%

shares edged down 0.2% after the cloud communication software group posted a strong outlook and earnings and sales that shot past Wall Street estimates.

Uber Technologies Inc. UBER stock was up 0.4% as the ride-share operator reported forecast-beating profit and sales.

How are other assets trading?

The ICE U.S. Dollar Index
DXY,
-0.20%
,
a measure of the currency against a basket of six major rivals, was flat.

West Texas Intermediate crude for March delivery
CL.1,
+1.67%

CLH22,
+1.67%

 rose 1.8% to $91.24 a barrel. Gold futures for April delivery 
GC00,
+0.16%

GCJ22,
+0.16%

ticked up 0.2%.

Bitcoin
BTCUSD,
+1.16%

rebounded from an initial selloff to rise 2.1%.

The Stoxx 600 Europe 
SXXP,
-0.14%

was up 0.1%, while the FTSE 100 
UKX,
+0.37%

 gained 0.5%.

The Shanghai Composite 
SHCOMP,
+0.17%

 rose 0.1%, while the Hang Seng Index 
HSI,
+0.38%

gained 0.3% and Japan’s Nikkei 225 
NIK,
+0.42%

rose 0.4%.

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