Core inflation of 3.9% for 12 months, versus 2.9% expected by the market, cast doubt on upcoming interest rate cuts by the Federal Reserve.
The new report hit the main Wall Street indices: the Dow Jones had its worst daily fall in a year and lost 1.55%, while the technological Nasdaq lost 2% and the S&P 500 sank 1.59%.
The US Bureau of Labor Statistics reported that, in monthly terms, consumer prices increased three tenths compared to December, while underlying inflation, a key data that the Fed analyzes to make its decisions on interest rates, remained at year-on-year terms in 3,9 %.
The main indicators of the US market have had five consecutive weeks of gains, driven largely by expectations that the Fed will begin to lower the reference interest rate this year, something that recent inflation data once again calls into question.
By sectors, red dominated, with the largest losses for non-essential goods (-1.96%) and the real estate sector (-1.84%). Among the 30 Dow Jones listed companies, the largest gains were for Disney (1.08%), while Walgreens (-4.77%) and Goldman Sachs (-3.54%) led the losses.
The barrel of US West Texas Intermediate (WTI) oil for March rose 1.23% to $77.87, while the price of North Sea Brent for delivery in April gained 0.93% to $82.77.
“The latest figures, which show a reacceleration” of the inflation rate, “especially in the three- and six-month readings (…), support the Fed’s view that rate cuts are not imminent,” observed Rubeela Farooqi , chief economist at High Frequency Economics.
The value of Treasury bonds increases
Treasury bond rates reacted higher. The 10-year paper yields remained at 4.30% against 4.17% on Tuesday, at a high in almost two and a half months. Two-year bond rates jumped to 4.64% from 4.47%.
For Ian Shepherdson, of Pantheon Macroecononomics, the inflation data is “an unpleasant surprise” but it does not change the trend, which is towards a decrease in inflation.
Similarly, for Maris Ogg, of Tower Bridge Advisors, the January CPI is “an incident along the way.”
Among the stocks of the day, Coca Cola, a top member of the Dow Jones, fell 0.59% despite quarterly results that benefited from both higher sales and higher prices.
The online commerce platform Shopify sank 13.40% on its side. Its quarterly results exceeded expectations, but the projections disappointed the market.
Airbnb returned the smile to some operators after the closure, by publishing its results. After ending with a fall of 1.94%, its shares took off 8% in electronic exchanges after hours thanks to sales above expectations in 2023.
The group foresees a growth of 12-14% in its turnover in 2024.
Lyft, Uber’s competitor, soared 28% after the close, after announcing results that exceeded forecasts and the expectation of reaching balance in its finances this year.
The online brokerage platform Robinhood, for its part, rose 12% after the close, after publishing a 37% higher turnover in the last quarter of the year than in the same period of 2022.
Source: With information from AFP.
