Wall St slides as hot inflation data dampens early rate-cut hopes

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 12, 2024. REUTERS/Brendan McDermid


By Johann M Cherian and Ankika Biswas

(Reuters) — Wall Street’s main indexes slid on Tuesday, hitting one-week lows, after a hotter-than-expected consumer inflation reading drove U.S. Treasury yields higher, smashing market speculations for imminent interest rate cuts.

A Labor Department report showed U.S. consumer prices increased more than expected in January amid rises in the costs of shelter and healthcare.

Rate-sensitive megacaps like Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN) and Meta Platforms (O:META) lost between 1.2% and 2.2%, as yields on U.S. Treasury notes across the board spiked to two-month highs. [US/]

Chip stocks such as Micron Technology (NASDAQ:MU), Advanced Micro Devices (NASDAQ:AMD) and Broadcom (NASDAQ:AVGO) dropped between 2.5% and 4.5%, sending the Philadelphia SE Semiconductor index down 2.5%.

Real estate and consumer discretionary led losses among the 11 major S&P 500 sector indexes, with real estate falling to an over two-month low.

Trader bets for an at least 25-basis-point rate reduction in May dropped to 38%, from about 58% before the data, the CME FedWatch tool showed.

«Tuesday’s stronger-than-expected CPI print may cause the Fed to delay its rate cuts past May and June, which is when the market expects the Fed to begin cutting,» said Skyler Weinand, chief investment officer at Regan Capital.

«Getting to the Fed’s magical 2% inflation target may prove more difficult than expected and result in elevated interest rates for a longer period of time.»

The latest data comes on the heels of a modest revision to inflation in the last quarter of 2023 that left investors moderately relieved on the trajectory of inflation.

The Cboe volatility index, a market fear gauge, hit an over two-week high.

At 9:42 a.m. ET, the Dow Jones Industrial Average was down 427.32 points, or 1.10%, at 38,370.06, the S&P 500 was down 66.94 points, or 1.33%, at 4,954.90, and the Nasdaq Composite was down 303.61 points, or 1.90%, at 15,638.94.

The small caps Russell 2000 index also shed 1.8%.

Wall Street has been on a rally, with the benchmark S&P 500 gaining in 14 out of the past 15 weeks, the first time since March 1972. The Dow is also trading at a record high level, and on Monday the Nasdaq briefly surpassed its record closing high from November 2021.

Among top movers, JetBlue Airways (NASDAQ:JBLU) jumped 11.3% after activist investor Carl Icahn reported a 9.91% stake, adding that the carrier’s stock is ‘undervalued’.

Coca-Cola (NYSE:KO) rose 1.2% as the beverage maker surpassed expectations for fourth-quarter revenue, benefiting from higher product prices and buoyant demand.

Arista Networks (NYSE:ANET) shed 5.1% after the cloud solutions provider forecast current-quarter adjusted gross margin below expectations.

Software firm Cadence Design (NASDAQ:CDNS) Systems dropped 2.7% following a bleak quarterly sales forecast, while toymaker Hasbro (NASDAQ:HAS) lost 3.3% after a steeper-than-expected drop in holiday-quarter sales and profit.

Tripadvisor jumped 16.1% as the online travel agency formed a special committee to evaluate proposals that may result in a deal.

Declining issues outnumbered advancers for a 10.55-to-1 ratio on the NYSE and a 5.65-to-1 ratio on the Nasdaq.

The S&P index recorded 14 new 52-week highs and no new lows, while the Nasdaq recorded 19 new highs and 45 new lows.


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