Stocks moved sharply lower in early trading on Wednesday in reaction to hotter than expected consumer price inflation data. The major averages have climbed well off their worst levels since then but remain in negative territory.
After falling nearly 500 points early in the session, the Dow is currently down 275.84 points or 0.6 percent at 44,317.81. The S&P 500 is down 27.26 points or 0.5 percent at 6,041.24 and the Nasdaq is down 54.84 points or 0.3 percent at 19,589.02.
The early sell-off on Wall Street came following the release of a closely watched Labor Department report showing consumer prices in the U.S. increased by more than expected in the month of January.
The Labor Department said its consumer price index advanced by 0.5 percent in January after climbing by 0.4 percent in December. Economists had expected consumer prices to rise by 0.3 percent.
The report also said the annual rate of consumer price growth accelerated to 3.0 percent in January from 2.9 percent in December, while economists had expected the pace of growth to remain unchanged.
The bigger than expected monthly increase by consumer prices partly reflected a continued surge by energy prices, which shot up by 1.1 percent in January after spiking by 2.4 percent in December.
Excluding the jump by energy prices as well as a 0.4 percent increase by food prices, core consumer prices rose by 0.4 percent in January after inching up by 0.2 percent in December. Core prices were expected to increase by 0.3 percent.
The annual rate of core consumer price growth also ticked up to 3.3 percent in January from 3.2 percent in December. Economists had expected the pace of growth to slow to 3.1 percent.
The hotter than expected inflation data has increased speculation the Federal Reserve will leave interest rates on hold for a prolonged period.
Fed Chair Jerome Powell noted during his congressional testimony on Tuesday that the central bank can “maintain policy restraint for longer” if inflation does not continue to move sustainably toward 2 percent.
“Today’s data reaffirms Powell’s decision to put rate cuts on the back burner for an extended period of time,” said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management.
He added, “Overall, today’s inflation data should force market participants to re-think the Fed’s ability to cut rates this year, especially considering the rise in prices is likely unrelated to any tariff activity from the White House.”
Sector News
Despite the recovery attempt by the broader markets, housing stocks continue to see substantial weakness, with the Philadelphia Housing Sector Index slumping by 2.5 percent to its lowest intraday level in a month.
Considerable weakness also remains visible among networking stocks, as reflected by the 1.2 percent loss being posted by the NYSE Arca Networking Index.
Interest rate-sensitive commercial real estate and telecom stocks are also seeing notable weakness, while gold stocks have shown strong move to the upside despite a decrease by the price of the precious metal.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index rose by 0.4 percent, while China’s Shanghai Composite Index advanced by 0.9 percent and Hong Kong’s Hang Seng Index surged by 2.6 percent.
The major European markets have also moved to the upside on the day. While the German DAX Index is up by 0.5 percent, the French CAC 40 Index is up by 0.3 percent and the U.K.’s FTSE 100 Index is up by 0.2 percent.
In the bond market, treasuries have moved sharply lower in reaction to the consumer price inflation data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 11.7 basis points at 4.654 percent.
Business News
U.S. Stocks Regain Ground After Early Slump But Remain Mostly Lower
2025-02-12 16:00:22
