The US stock market witnessed a huge decline due to investor action on Tuesday. Latest inflation data for January, which indicated a slower pace of price softening than many had anticipated. This development prompted a reassessment of the economic outlook and its implications for monetary policy.
Traders now expect it will take longer before the Federal Reserve lowers the benchmark interest rate given inflation’s resilience.
He S&P 500 down about 1.3%, reversed his attempt to maintain a historic rally. industry average Dow Jones fell nearly 1%Moving away from a potential closing record and nasdaq compositeWhich is known for its strong technical component, is registered decrease of about 2% In the first minutes of the wheel.
January’s Consumer Price Index (CPI) report revealed stronger-than-expected price increases, defying forecasts and suggesting a more gradual slowdown in inflation. Notably, core inflation, which excludes the often volatile food and energy sectors, rose 0.4% in the month, the most significant monthly increase since April 2023. Overall, prices rose 3.1% year-on-year, more than economists expected. 2.9% is expected but this appears to be a slowdown compared to the annual growth of 3.4% in December.
Investors’ attention is also focused on the latest round of corporate earnings releases, with significant interest in releases from big companies like Coca-Cola, Shopify and Airbnb. The performance of these companies can provide more information about the broader economic picture and the potential for earnings to support market valuations beyond the major technology companies.
In the field of cryptocurrencies, the price of Bitcoin After a remarkable surge that took the digital currency to levels not seen since 2021, it fell below the US$50,000 mark. But inflation data bucked that trend and within minutes it shaved almost US$1,500 off the value of the most important cryptocurrency. The note was trading at $48,597.95 at closing.
Recent inflation data underscores the complex dynamics playing out in the U.S. economy, with persistent price pressures creating challenges for policymakers and investors alike. As the Federal Reserve continues to maintain the delicate balance between controlling inflation and supporting economic growth, market participants look to upcoming data releases from the central bank for further guidance on the trajectory of interest rates and its implications for investment strategies. And will monitor communications closely.
Investors have only one thing in mind. The level of rates maintained by the United States Federal Reserve (Fed) and which, thanks to the reduction of inflation, although at a slow pace, has been relatively successful – inflation reached 9.1% year-on-year in June 2022 – the rate Betting allowed for deduction this year. The most optimistic were encouraged to predict three rate cuts.
The Fed’s reference rate is a key input for stocks and other financial assets. If rates affect the value of money, a weak dollar increases stock market valuations. Conversely, expectations of higher rates over a longer period of time tend to weaken these quotes.
Inflation data, which despite slowing, made it slower than expected, indicating that Fed chief Jerome Powell will not risk cutting rates next month. And that the first accident may be further away than thought. Worse, the “core” inflation data, which Powell looks at most, didn’t slow at all.
“If you look deeper, the Fed is focusing on core services except housing. In fact it has increased. “This raises concerns that inflation will be harsher than we expect and that rates will remain high for a longer period of time,” he said. Chris Zaccarellithe CIO of the Independent Advisor Alliance told Reuters.
“This puts a nail in the coffin for March and opens the possibility that a rate cut in May may also be off the table,” he said.
“The warm report clearly reduces the chances of any Fed cut on March 20. The question is whether May 1 is still a possibility if the next set of inflation data is not lower than expected,” he agreed. quincy crosbyChief Global Strategist of LPL Financial of the same agency.
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