US stocks fell on Wednesday as investors digested a hotter-than-expected January inflation reading.
The Dow Jones Industrial Average (^DJI) fell around 0.8%, while the benchmark S&P 500 (^GSPC) slipped 1%. The tech-heavy Nasdaq Composite (^IXIC) pulled back more than 1.1%.
The Consumer Price Index (CPI) out Wednesday showed headline consumer inflation rose more than forecast in January. “Core” prices — which strip out the more volatile costs of food and gas — reversed the previous month’s easing, up 0.4% over last month and 3.3% over last year, with both rates higher than in December.
The surprise inflation print pushed back investor bets on interest-rate cuts in 2025. As of Wednesday morning, traders were pricing just one interest-rate cut, after pricing in two for most of the year.
A fresh batch of earnings provided some clues to Corporate America’s resilience. Kraft Heinz (KHC) shares slid after the packaged food maker’s 2025 profit outlook fell short. But CVS Health (CVS) stock got a boost as investors welcomed a smaller drop in quarterly profit than expected.
On the after-hours docket, Reddit (RDDT) results come amid sky-high Wall Street expectations. Robinhood’s (HOOD) report is also in focus after the stock touched a three-year high.
LIVE9 updates
Markets trim Fed rate cut bets
Yahoo Finance’s Jennifer Schonberger reports:
A hotter-than-expected inflation reading at the start of 2025 makes it much more likely that the Federal Reserve will keep rates on hold for the foreseeable future, reinforcing a cautionary stance from Fed Chair Jerome Powell and other central bank policymakers.
After the latest data from the Bureau of Labor Statistics showed that the Consumer Price Index (CPI) rose more than forecast in January, traders reduced their expectations for rate cuts in 2025 to just 1 — and not until much later in the year.
“It really does push the timeline into the second half of the year if things go well,” Claudia Sahm, chief economist at New Century Advisors and former Fed economist, told Yahoo Finance.
US stocks fell on Wednesday as investors digested a hotter-than-expected January consumer inflation reading.
The Dow Jones Industrial Average (^DJI), the S&P 500 (^GSPC), and the tech-heavy Nasdaq Composite (^IXIC) were all off about 1%.
Today at 1:32 PM UTC
Inflation rises more than expected in January
New data from the Bureau of Labor Statistics out Wednesday showed that a key inflation metric rose more than anticipated in January.
On a “core” basis, which strips out the more volatile costs of food and gas, the January Consumer Price Index (CPI) climbed 0.4% over the prior month, an acceleration from December’s 0.2% monthly gain and above the 0.3% economists had expected. On an annual basis, prices rose 3.3%, above the 3.1% economists had projected.
Headline consumer prices also rose more than expected. The CPI increased 3% over the prior year in January, an uptick from December’s 2.9% annual gain in prices. The yearly increase was above the 2.9% economists had expected.
The index rose 0.4% over the previous month, ahead of the 0.3% increase seen in November and also on par with economists’ estimates.
JPMorgan: S&P 500 at risk of falling 2% if inflation runs hot
The S&P 500’s (^GSPC)’ record run could face a setback, according to JPMorgan Market Intelligence. The team estimates the index may drop up to 2% if consumer prices (CPI) rise 0.4% or more in January from the previous month.
With CPI data due at 8:30 a.m. New York time, markets are on edge. A slightly hotter print could challenge the bullish outlook on US equities. The consensus estimate is for a 0.3% rise in month-on-month CPI.
Today at 12:57 PM UTC
Europe stocks marooned in wait for CPI
Stocks in Europe trod water on Wednesday, mirroring the muted tone in markets as investors prepared for a fresh reading on US consumer inflation.
The pan-European Stoxx 600 (^STOXX) index inched up less than 0.1%, staying in range of fresh record highs thanks to solid earnings from the likes of Heineken (HEIA.AS, HEINY).
In individual benchmarks, Germany’s DAX (^GDAXI) rose 0.3%, while the CAC (^FCHI) in Paris traded flat. London’s FTSE 100 index (^FTSE) hugged the flat line.
Today at 11:40 AM UTC
Gold hits brakes on record-setting rally
Gold (GC=F) continued to pull back from a recent all-time high on Wednesday, as traders assessed Jerome Powell’s message that the Fed isn’t in a hurry to cut interest rates.
Prices of gold bullion dropped below $2,890 an ounce, falling for a second day, after a record-setting run toward the key $3,000 level.
Meanwhile, gold futures slid almost 1% to around $2,906 an ounce, with the shine coming off the non-interest-bearing asset as the 10-year Treasury yield (^TNX) rose.
Prices for the metal have surged in recent days as investors sought out less risky assets in light of President Trump’s push for tariff hikes.
Today at 11:26 AM UTC
Good morning. Here’s what’s happening today.
Economic data: Consumer Price Index (January); Real average hourly earnings (January); MBA Mortgage Applications (week ending Feb. 7)
China’s AI-driven stock surge is gaining backing from Wall Street strategists, who believe the country’s emerging tech capabilities will help sustain the bull market.
Analysts from Morgan Stanley (MS), JPMorgan Chase & Co (JPM)., and UBS Group AG (UBS) predict that stock gains fueled by DeepSeek’s artificial intelligence model will continue.
Alibaba (BABA) stock saw a leap over 10% on the news that Apple (AAPL) is working with the Chinese e-commerce platform on breaking into artificial intelligence business in China.
