The Dow dropped sharply by 400 points Wednesday morning as the latest inflation data was higher than expected. The report comes as the ongoing tariff war has already raised fears among investors about higher inflation, as this means there is a lesser chance that the Fed would slash the interest rate this year.
Shortly after the market opened, the Dow Jones Industrial Average was 420 points or 0.9% down. The tech-heavy Nasdaq and S&P 500 shed 0.8% each. Meanwhile, the 10-year Treasury yield climbed above 4.6%.
The Bureau of Labor Statistics reported on Wednesday that the Consumer Price Index (CPI) increased by 0.5% last month, following a 0.4% rise in December. This increase was higher than the 0.3% that Wall Street had anticipated, according to estimates compiled by FactSet (FDS-0.21%). Additionally, the CPI rose by 3% compared to the previous year, surpassing expectations.
Core inflation, excluding volatile food and energy, increased 0.4% in January, the BLS said, while analysts had expected a 0.3% increase compared to a month earlier. Year-over-year, core inflation rose 3.3%, while analysts had expected core inflation to fall to 3.1% from 3.2%.
“Today’s data reaffirms Powell’s decision to put rate cuts on the back burner for an extended period of time,” Charlie Ripley, Senior Investment Strategist for Allianz Investment Management (ALV+0.18%), told Quartz in an email.
“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.”
Shares of chipmaker Super Micro Computer (SMCI+6.53%) rose by 10% in the morning trading after reporting earnings a day earlier. CVS Health Corporation (CVS+15.18%) also saw an increase of over 9% in the morning after announcing earnings that exceeded analysts’ expectations.
Today, trading platform Robinhood (HOOD+1.85%) and social media giant Reddit (RDDT+1.14%will each report in the evening, offering insights into the retail investing landscape and the growing influence of social media.
– William Gavin contributed to the article
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