Stocks fall, dollar and yields gain after hot US inflation data

Feb 13, 2024

By Caroline Valetkevitch

NEW YORK (Reuters) -Global stock market indexes dropped, the 10-year U.S. Treasury yield hit a 2-1/2-month high and the dollar touched a three-month peak against the yen on Tuesday after data showed U.S. inflation slowed less than expected in January.

The U.S. consumer price index report pushed back market expectations that any interest rate cuts by the Federal Reserve were imminent.

All three major U.S. stock indexes fell more than 1% each, and the Dow Jones industrial average posted its biggest daily percentage drop in almost 11 months.

The consumer price index increased 0.3% last month after gaining 0.2% in December, the Labor Department’s Bureau of Labor Statistics said on Tuesday.

Economists polled by Reuters had forecast the CPI gaining 0.2% on the month and rising 2.9% year-on-year.

“Markets are taking it pretty hard because it puts a nail in the coffin of early (March) Fed rate cuts,” said Carol Schleif, chief investment officer at BMO Family Office in Minneapolis, Minnesota. “It’s evidence of a still-sturdy economy. There’s still inflation to be wrung out of the system.”

After the data, expectations rose that the Fed will likely not cut rates until its June 11-12 policy meeting, with CME Group’s FedWatch Tool showing a 74.4% chance for a cut of at least 25 basis points at that meeting. Expectations for a cut at the April 30-May 1 meeting declined to 36.1% from 60.7% on Monday.

The yield on the benchmark U.S. 10-year Treasury note rose 14 basis points to 4.31% after reaching 4.314%, its highest level since Dec. 1.

The Dow Jones Industrial Average fell 524.63 points, or 1.35%, to 38,272.75, the S&P 500 lost 68.67 points, or 1.37%, to 4,953.17 and the Nasdaq Composite lost 286.95 points, or 1.80%, to 15,655.60.

U.S. stocks have been trading at record highs, boosted by the big technology companies and expectations the Fed will soon cut rates.

The MSCI world equity index, which tracks shares in 49 nations, lost 1.1%. The Europe-wide Stoxx 600 index fell 0.95%.

The greenback topped 150 yen for the first time since November following the data.

The dollar surged to 150.88 yen, a three-month peak. It was last up 0.9% at 150.75 yen.

The dollar index also touched a three-month high. It was last up 0.68% at 104.86, while the euro was down 0.58% at 1.0709.

In cryptocurrencies, bitcoin touched its highest since December 2021 at $50,383, but was last down 0.58% at $49,545.00.

Also due this week are U.S. retail sales data and a U.S. producer prices report.

Oil prices rose as tensions continued in the Middle East and eastern Europe.

Brent futures settled 77 cents higher at $82.77 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 95 cents to settle at $77.87.

Gold prices fell below the key $2,000 per ounce level to a two-month low following the CPI data. Spot gold was down 1.3% at $1,993.29 an ounce, its lowest since Dec. 13.

(Reporting by Caroline Valetkevitch in New York and Harry Robertson in London; Editing by Jonathan Oatis and Stephen Coates)

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