U.S. stock indexes bounced around in choppy trade Thursday as investors assessed a hotter-than-expected January consumer-price index that underlined expectations for the Federal Reserve to respond aggressively to persistent inflation running at a four-decade high.
How are stock indexes trading?
The Dow Jones Industrial Average
fell 164 points, or 0.5%, to 35,603.
The S&P 500
as down 29 points, or 0.7%, at 4,557.
The Nasdaq Composite
shed 113 points, or 0.8%, to 14,377.
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 briefly edge into positive territory Thursday, before slipping back into the red late morning, in choppy trade following the release of a key inflation reading.
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.
The initial market reaction was understandable after stocks had retraced a large chunk of a January selloff inspired by inflation fears and expectations for a more aggressive Fed, said Art Hogan, chief market strategist at National Securities, in a note.
But that January selloff had come as investors largely “baked in” a Fed rate move in March, he said. While fed-funds futures markets on Thursday moved to more aggressively price in the potential for a half-point hike, that was largely playing catch-up to market psychology.
Markets are likely to remain volatile in the run-up to the March rate increase, with an intense focus on any inflation-related data, but are likely to calm once the Fed makes its initial move and provides more detail on its path, Hogan said. Meanwhile, investors are balancing concerns about inflation and the Fed with a better-than-expected earnings season, he said.
“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.
Treasury yields jumped, with the 10-year Treasury note
topping the 2% threshold for the first time since 2019, trading at 2.014% in recent action.
Some analysts see the higher-than-expected inflation number as maintaining pressure on interest-rate sensitive technology stocks, though others contend the hit to growth stocks has largely reflected the expected rise in rates. 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?
climbed 4.8% 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.
How are other assets trading?
The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, fell 0.3%.
rebounded from an initial selloff to rise 0.8%.