The stock market was falling Thursday after January’s inflation reading came in hotter than expected, raising the specter of even faster Federal Reserve rate hikes.
By midmorning, the
Dow Jones Industrial Average
fell 54 points, or 0.2%, after the index rose 305 points Wednesday. The
was off 0.2%, while the
was down 0.2%. The indexes slid after the inflation numbers came out, but were off their worst levels of the day.
The consumer-price index rose 7.5% year-over-year in January, beating expectations of 7.2% and accelerating from the 7% result for December. The core consumer-price index, which strips out the more volatile food and energy prices, rose 6%, beating estimates of 5.9%.
That is not what the stock market wanted to see. Investors were hoping that the report would give an indication that the rate of inflation has peaked and will slow down. Slower inflation could mean that the Fed will lift interest rates at a slower pace than feared, as the central bank is expected to hike rates for the first time in March.
“Inflation and central banks’ response to it remain front and [center] in investors’ minds,” wrote Craig Erlam, senior market analyst at Oanda.
The bond market, meanwhile, was reflecting more rate hikes from the Federal Reserve. The 2-year Treasury yield, which tries to forecast the number of short-term rates hikes within the next couple of years, rose to 1.49% from 1.36% just before the inflation print. The 10-year Treasury yield jumped to 1.99% from 1.93%.
That’s consistent with the recent trend in the fed funds futures market, which tries to predict the probability of coming rate hikes or cuts. That market is reflecting a 29% chance that the Fed lifts rates by 50 basis points in March, rather than the standard 25 basis points, up from a 24% probability on Wednesday.
That is causing stocks to sell off, as the market had already jumped to begin the week. The S&P 500 had risen almost 2% for the week coming into Thursday and 6% from the low point of a recent drawdown hit at the end of January.
The possibility of slower economic and earnings growth is one concern for stock investors, but the other concern centers on valuations. Higher long-dated bond yields make future profit less valuable and many technology companies are valued on the basis of profits coming many years down the line. That’s why the tech-heavy Nasdaq was getting hit so hard Thursday.
was up 0.5%, while Tokyo’s
ended the day with gains of 0.4%.
Here are five stocks on the move Thursday:
(ticker: DIS) jumped 5.5% after the group reported better-than-expected quarterly financial results. The entertainment giant beat Wall Street’s estimates on subscriber numbers for its Disney+ streaming service and its theme parks segment topped performance expectations by a wide margin.
Other entertainment stocks moved on the back of Disney’s results.
(ROKU) rose 3.8%, while
(NFLX) initially rose, then fell 2.5%.
(AZN) rose 5% after the pharmaceutical group forecast higher 2022 sales growth after reporting better-than-expected fourth-quarter profit, with revenue boosted by sales of its Covid-19 vaccine.
(CS) dropped 6.7% after the Swiss bank posted a greater-than-expected loss for the final quarter of 2021. The bank also warned that it faces headwinds in 2022 due to high restructuring and compensation costs.