On Tuesday, the stock market faced a significant downturn, marking its worst performance since March 2023, as hotter-than-expected inflation data for January triggered a spike in Treasury yields. This inflation surge has fueled doubts about the Federal Reserve’s ability to implement several rate cuts this year—a crucial factor that had been bolstering optimism in the equity market.
The Dow Jones Industrial Average closed the day down by 524.63 points, or 1.35%, its steepest decline in terms of percentage since March 2023. At one point, the 30-stock index plummeted by as much as 757.52 points, or nearly 1.95%. Similarly, the S&P 500 and the Nasdaq Composite also faced declines, falling 1.37% and 1.8%, respectively. The Russell 2000 index, which represents smaller companies, was hit particularly hard, tumbling nearly 4%—its worst session since June 2022.
The root of the market’s anxiety lies in the latest consumer price index (CPI) data. For January, the CPI rose by 0.3% from December and recorded a 3.1% increase on an annual basis. These figures surpassed the expectations of economists polled by Dow Jones, who had forecasted a 0.2% month-over-month increase for January and a 2.9% year-over-year rise. Core prices, which exclude the often volatile food and energy components, also exceeded expectations, rising 0.4% from the previous month and 3.9% from the previous year—against the anticipated increases of 0.3% and 3.7%, respectively.
Art Hogan, chief market strategist at B. Riley Financial, commented on the situation, suggesting that the higher-than-expected CPI data could be seen as a reason for investors to reassess the market’s recent bullish trajectory. He noted, “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.”
Also Read: US Envoy Sets Realistic Expectations: No Ukraine NATO Invitation Expected at July Summit
Following the inflation data release, Treasury yields saw a significant jump, with the 2-year yield climbing above 4.63% and the 10-year yield surpassing 4.29%. This increase in yields put particular pressure on technology stocks, which have been major contributors to the market’s rally to record highs as rates declined. Leading the downturn, Microsoft saw its shares slide by 2.2%, while Amazon’s shares fell by 2.1%.
The market’s reaction was not uniform, however. In corporate news, JetBlue Airways experienced a notable surge, with its stock jumping 20% following the news that activist investor Carl Icahn had acquired a nearly 10% stake in the airline. Meanwhile, other companies faced challenges. Toymaker Hasbro saw its shares decline by 3% after failing to meet analyst expectations for the fourth quarter. Avis Budget Group also suffered a significant setback, with its shares slipping 22% due to disappointing fourth-quarter revenue figures.
Tuesday’s market movement underscores the complex interplay between inflation data, interest rate expectations, and individual corporate performances. As investors digest the latest economic indicators, the uncertainty surrounding the Federal Reserve’s next moves will likely continue to influence market dynamics in the near term. With inflation still presenting a challenge, the path forward for the equity market remains fraught with potential volatility, underscoring the importance of closely monitoring economic trends and corporate earnings reports.
Also Read: Breaking News: Safety Concerns Rise as Student Injured in Knife Incident at Brighton High School
