Traders work on the floor of the New York Stock Exchange in New York on Feb. 3, 2025.
Angela Weiss | Afp | Getty Images
Stocks slumped and interest rates spiked Wednesday after consumer prices rose more than expected in January, raising concern that inflation may reignite.
The Dow Jones Industrial Average tumbled 343 points, or 0.8%. The S&P 500 shed 0.5%, while the Nasdaq Composite dipped 0.4%.
“The hotter than expected CPI confirms investors’ anxiety regarding too-hot inflation that will keep the Fed on the sidelines (as opposed to cutting rates),” Sameer Samana, Wells Fargo Investment Institute head of global equities and real assets, said.
January’s consumer price index jumped 0.5% for the month, putting the annual inflation rate at 3%. Both were more than the 0.3% and 2.9% increases expected by economists polled by Dow Jones. Excluding volatile food and energy prices, core CPI rose 0.4% on the month and 3.3% for the past 12 months, both higher than expected.
The 10-year Treasury yield, a benchmark for mortgages, auto loans and credit cards, jumped to 4.66% from 4.54% on Tuesday.
A broad sell-off ensued following the release of CPI. Shares of most mega-cap technology stocks, including Amazon, Microsoft and Alphabet, declined. Consumer shares and bank stocks at risk of slower spending and a weaker economy also retreated.
Tesla bucked the trend and gained more than 2%. Intel and Palantir also traded higher, helping curb losses. CVS Health shares popped more than 14% on a major fourth-quarter earnings beat.
“While risk markets can go higher, it will be a choppier trajectory than the last two years,” Samana said.
Following the jump in CPI, investors will likely be paying closer attention to the day two testimony from Federal Reserve Chair Jerome Powell’s before Congress. He speaks to the House Committee on Financial Services on Wednesday. Powell testified Tuesday to the Senate Banking Committee that the Fed was in no hurry to make further interest rate cuts. The latest data makes it less likely the Fed will resume its rate-cutting campaign anytime soon and now raises concern perhaps the next move could even be a hike.
President Donald Trump said Wednesday morning before the CPI data was released that interest rates should be lowered.
