The latest consumer price index (CPI) data, published on Tuesday at 8:30 a.m., showed a 3.1% increase in inflation for January, disappointing consumers and the market. Economists surveyed by FactSet had predicted a 2.9% increase.
Core CPI, excluding more volatile and fuel prices, increased by 3.9% from a year ago, surpassing economists' predictions of 3.7%.
In response, the Federal Reserve emphasized that lowering inflation to its 2% target remains its primary objective. However, today's report underlines that achieving that goal will be difficult.
By 4 p.m., CNBC reported that the Dow Jones index plummeted 640 points amid doubts about the Fed's ability to cut interest rates multiple times this year:
“This may well come as a easy excuse to take some of the froth out of the top of this market that's been universally higher thus far this year,” said Art Hogan, chief market strategist at B. Riley Financial. “The CPI was, as reported today, just a touch hotter than expectations and proof positive that we're not on a linear path, but we're on a path headed lower.”
The 2-year Treasury yield jumped above 4.63%, and the 10-year yield topped 4.29% following the CPI data. Tech shares including Microsoft and Amazon, which have steered the market run to record highs as rates declined, led the losses in trading Tuesday. Microsoft slid 2.2%, while Amazon fell 2.1%.
In corporate news, JetBlue Airways spiked 20% after activist investor Carl Icahn reported a nearly 10% stake in the airline. Toymaker Hasbro lost 3% after missing analyst expectations for the fourth quarter. Shares of Avis Budget Group slipped 22% on the back of disappointing fourth-quarter revenue.
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