Dow, S&P 500, Nasdaq slip as hot inflation data spooks markets

The latest Consumer Price Index (CPI) showed that housing inflation picked up in January on a monthly basis, reversing the easing trend seen in the previous month.

Data from the Bureau of Labor Statistics showed shelter costs rose 0.4% in January compared to the previous month and higher than December’s 0.3% monthly increase. On an annual basis, prices rose 4.4% from a year earlier in January, slower than the 4.6% in December and the smallest 12-month increase since January 2022.

“As we saw through 2024, shelter inflation will continue to take time to get back to reasonable levels,” Josh Hirt, Vanguard senior US economist, said in an email after the release.

The rent index rose 0.3% in January, matching December’s pace of 0.3%. Meanwhile, prices for owners’ equivalent rent increased 0.3% for the month, unchanged from January’s 0.3% gain. Owners’ equivalent rent is the estimated rent a homeowner would pay if they were renting their own property.

Meanwhile the lodging away from home index rose 1.4% in January after falling 0.5% in December, and household insurance accelerated 1.1% last month.

“We continue to hold the view that shelter inflation will eventually moderate over the course of 2025,” Hirt added.

Yahoo Finance’s Pras Subramanian reports:

New and used car prices were mixed to start the year in January’s Consumer Price Index (CPI) reading, but used prices continued trending higher, with January’s jump the largest since May 2023.

New car prices were flat in January and down 0.3% compared to a year ago, whereas used vehicles popped 2.2% in January and were up 1.0% for the year.

This comes as overall prices in the US rose 0.5% over the previous month, the largest monthly headline increase since August 2023 and a slight acceleration from the 0.4% rise seen in December. Year-over-year prices rose 3.0% over the prior year in January, an uptick from December’s 2.9% annual gain in prices.

Stocks rallied off their lows of the day throughout Wednesday as the Nasdaq Composite narrowly crossed into positive territory around 12:30 p.m. ET.

Tesla (TSLA) proved to be a key catalyst for the tech-heavy index as shares rallied more than 4%.

Yahoo Finance’s Anjalee Khemlani reports:

CVS (CVS) reported fourth quarter and full year 2024 earnings Wednesday, beating Wall Street’s expectations and sending its stock up more than 14%.

Full year revenue came in at $372.8 billion, while fourth quarter revenue was $97.7 billion compared to Wall Street’s expectations of $96.8 billion. The health care benefits segment, which includes its various insurance products, was down slightly, with ongoing Medicare and Medicaid headwinds, which have also impacted its peers, dragging the company’s revenue.

Still its retail pharmaceutical business, at a time when the business model is struggling, increased, as well as the health care services segment.

When asked directly about President Trump’s tariffs and how they could impact the Federal Reserve’s monetary policy path, Fed Chair Jerome Powell admitted it’s rather unclear.

As he did during a Jan. 29 press conference, Powell stressed there is increased uncertainty right now as the Fed waits to hear what exactly happens with Trump’s policy. He added that while tariffs could impact the economic outlook and cause the Fed to change its monetary policy plans, the central bank is also watching immigration, fiscal policy, and regulatory policy.

Powell said they can’t assess how any of those factors will impact the economic outlook until it’s clear what policies are actually being put into place.

For now, Powell said Wednesday’s January CPI reading showed similar signs to what the Fed has been seeing.

Powell said inflation is “close” to the Fed’s 2% goal but “we’re not there yet.”

Yahoo Finance’s Jennifer Schonberger reports:

A hotter-than-expected inflation reading at the start of 2025 makes it much more likely that the Federal Reserve will keep rates on hold for the foreseeable future, reinforcing a cautionary stance from Fed Chair Jerome Powell and other central bank policymakers.

After the latest data from the Bureau of Labor Statistics showed that the Consumer Price Index (CPI) rose more than forecast in January, traders reduced their expectations for rate cuts in 2025 to just one — and not until much later in the year.

“It really does push the timeline into the second half of the year if things go well,” Claudia Sahm, chief economist at New Century Advisors and former Fed economist, told Yahoo Finance.

Read more here.

US stocks fell on Wednesday as investors digested a hotter-than-expected January consumer inflation reading.

The Dow Jones Industrial Average (^DJI), the S&P 500 (^GSPC), and the tech-heavy Nasdaq Composite (^IXIC) were all off about 1%.

New data from the Bureau of Labor Statistics out Wednesday showed that a key inflation metric rose more than anticipated in January.

On a “core” basis, which strips out the more volatile costs of food and gas, the January Consumer Price Index (CPI) climbed 0.4% over the prior month, an acceleration from December’s 0.2% monthly gain and above the 0.3% economists had expected. On an annual basis, prices rose 3.3%, above the 3.1% economists had projected.

Headline consumer prices also rose more than expected. The CPI increased 3% over the prior year in January, an uptick from December’s 2.9% annual gain in prices. The yearly increase was above the 2.9% economists had expected.

The index rose 0.4% over the previous month, ahead of the 0.3% increase seen in November and also on par with economists’ estimates.

Read more here.

The S&P 500’s (^GSPC) record run could face a setback, according to JPMorgan Market Intelligence. The team estimates the index may drop up to 2% if the Consumer Price Index (CPI) rises 0.4% or more in January from the previous month.

With CPI data due at 8:30 a.m. New York time, markets are on edge. A slightly hotter print could challenge the bullish outlook on US equities. The consensus estimate is for a 0.3% rise in month-on-month CPI.

Economic data: Consumer Price Index (January); Real average hourly earnings (January); MBA Mortgage Applications (week ending Feb. 7)

Earnings: Albemarle (ALB), Biogen (BIIB), CVS Health (CVS), Cisco (CSCO), Dutch Bros (BROS), Generac (GNRC), Kraft Heinz (KHC), MGM Resorts (MGM), Reddit (RDDT), Robinhood (HOOD), The TradeDesk (TTD)

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