Nasdaq, S&P, Dow fall and yields climb after latest CPI print

Trading At The CBOT During FOMC Announcement

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Major market averages moved lower on Tuesday morning as the latest round of inflation data came in stronger than what was anticipated.

Early on and the Nasdaq Composite (COMP.IND) was -2.1% and also struggled after weak guidance from Lattice Semiconductor (LSCC) raised some doubts in the high-flying chip sector. The S&P 500 (SP500) was -1.2% and the Dow (DJI) was -0.8%.

“Risk of an inflation comeback is under-priced and rising,” strategist Ben Laidler wrote. “With the US labor market surprisingly healthy and economic growth strong … Q1 GDP NOWCast is an above average 3.4%.”

“10-year bond yields are up, Fed rate cut hopes pushed back, and US dollar the best performing major currency this year. Stocks welcomed the lower recession risk and firmer profits outlook. But may be under-pricing the tail-risk of an inflation upside surprise. It’s the most important number in markets, the biggest investment risk, and our inflation tracker is now flashing yellow.”

The January CPI data showed that inflation rose more than what was expected for the month. January consumer price index came in at +0.3% versus the +0.2% forecasted level. At the same time core CPI, which excludes food and energy arrived at +0.4% compared to the anticipated +0.3% figure.

The 10-year Treasury yield (US10Y) jumped 10 basis points to 4.28%. The 2-year yield (US2Y) was also up 12 basis points to 4.60%.

Roy Walsh

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