The stock market faced a rough start on Wednesday after a hotter-than-expected inflation report from the Labor Department. Investors were already cautious as Federal Reserve Chair Jerome Powell prepared to testify before Congress again. The Dow Jones Industrial Average, S&P 500, and Nasdaq all traded lower in premarket hours.
Stock Market Falls on Inflation
The Consumer Price Index (CPI) showed a 0.5% rise in January, surpassing expectations of 0.3%. On an annual basis, inflation climbed to 3%, slightly higher than the estimated 2.9%. Core CPI, which excludes food and energy prices, also increased more than anticipated. This report raised concerns that inflation is not cooling as quickly as the Federal Reserve had hoped, which could delay interest rate cuts.
Following the report, U.S. Treasury yields surged, with the 10-year yield jumping to 4.61%. Oil prices also pulled back, with West Texas Intermediate crude trading near $72.50 per barrel.
On Tuesday, Powell addressed Congress, suggesting that the Federal Reserve would maintain its restrictive monetary policy if inflation remained stubborn. His remarks indicated that rate cuts might not come as soon as the market had anticipated. Powell is scheduled to speak again on Wednesday, where investors will closely analyze his comments for any signals on future interest rate moves.
Major tech stocks and financial firms saw mixed reactions to the inflation data. Nvidia’s partner, Super Micro Computer, initially fell after cutting its full-year sales forecast but rebounded in premarket trading. Other notable earnings movers included CVS Health, which gained 10%, while Lyft shares dropped 13%.
Meanwhile, Tesla shares plunged 6.3% on Tuesday, marking their lowest close since November. However, the stock showed signs of recovery, rising nearly 2% in early Wednesday trading. Nvidia, a major player in the artificial intelligence sector, also struggled but remained above a key technical support level.
The next big event for investors will be Powell’s testimony before the House Financial Services Committee. His statements will provide further clarity on the Federal Reserve’s plans regarding interest rates. Additionally, earnings reports from major companies like Amazon, Microsoft, and Apple will continue to influence market sentiment.
While inflation remains a key concern, investors will be watching closely for any signs of policy shifts from the Federal Reserve in the coming weeks. Until then, volatility is likely to persist in the stock market.
