Stock Markets Decline Amid Unexpected Inflation Surge
The S&P 500 Index ($SPX) (SPY) has dropped -0.91%, while the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.92%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.89%. March E-mini S&P futures (ESH25) are down -0.87%, and March E-mini Nasdaq futures (NQH25) have decreased by -0.80%.
Unexpected Rise in Consumer Prices Affects Market Outlook
Today’s stock market sees declines, pushing the S&P 500 and Dow Jones Industrials to their lowest points in a week. This downward trend follows a rise in bond yields, triggered by higher-than-expected U.S. consumer prices in January. The latest Consumer Price Index (CPI) report suggests that the Federal Reserve may maintain interest rates for longer than previously anticipated.
January CPI Surprises Analysts
U.S. January CPI accelerated to +3.0% year-over-year, an increase from 2.9% in December, surprising many who expected no change. Additionally, the January CPI excluding food and energy rose to +3.3% year-over-year, up from 3.2% in December, which was also above expectations of 3.1%.
Mixed Earnings Reports Impact Stock Performance
Today’s corporate earnings results show a divide. Biogen has seen a drop of more than -6% after announcing a 2025 adjusted EPS forecast below consensus. Similarly, Kraft Heinz is down more than -5% for the same reason. In contrast, CVS Health has surged by over +14% thanks to better-than-expected Q4 sales. Super Micro Computer is also doing well, up more than +6% after forecasting sales for its fiscal year that far exceed estimates.
Mortgage Applications and Interest Rates
In mortgage news, U.S. mortgage applications rose +2.3% for the week ending February 7. The purchase mortgage sub-index fell -2.3%, while the refinancing sub-index rose +9.6%. The average 30-year fixed mortgage rate decreased slightly to 6.95% from 6.97% in the previous week.
Upcoming Economic Insights from Fed Chair Powell
This week’s focus includes Fed Chair Powell’s testimony this morning regarding the economy and monetary policy. Analysts are also watching for anticipated declines of -0.1% in January retail sales and a +0.1% rise in manufacturing production.
Earnings Season Progresses
As earnings season continues, data shows that of the 326 stocks in the S&P 500 that have reported results, 77.6% have beaten earnings estimates, which is slightly below the three-year average of 78.4%.
Low Expectations for Fed Rate Cuts
The markets are currently expecting just a 2% chance of a -25 basis point rate cut during the next FOMC meeting scheduled for March 18-19.
Global Market Performance Mixed
International stock markets reflect a mixed performance today. The Euro Stoxx 50 has fallen by -0.15% after hitting a 24-year high, while China’s Shanghai Composite Index has risen +0.85% to reach a five-week high. Japan’s Nikkei Stock 225 is up +0.42%.
Interest Rate Trends
March 10-year T-notes (ZNH25) are down -24 ticks today, with the 10-year T-note yield increasing +9.8 basis points to 4.633%. After the inflation news, T-notes fell to a 2.5-week low, and the 10-year yield reached a height of 4.649%. Additionally, concerns over European bonds and surging inflation expectations are influencing T-notes negatively.
ECB’s Position on Interest Rates
European rates are also on the rise, with the German bund yield reaching a 1.5-week high at 2.475%. Italy reported a significant drop in industrial production, falling -3.1% month-over-month, which was much worse than expected.
Comments on ECB Rate Cuts
ECB Governing Council member Holzmann expressed that a 50 basis point cut might not be wise due to persistent inflation risks linked to tariffs. Swap markets predict a 100% chance for a -25 basis point cut by the ECB at their meeting on March 6.
Key Stock Movements Today
Westinghouse Air Brake Technologies (WAB) leads the losses in the S&P 500, falling over -8%, as it projected lower than expected 2025 sales. Waters (WAT) has dropped more than -7% after underestimating Q1 adjusted EPS. In the Nasdaq 100, Biogen (BIIB) is down more than -6% for similar reasons. Conversely, CVS Health (CVS) is thriving with a +14% increase in stock price after reporting strong sales.
Upcoming Earnings Reports
Earnings reports for February 12, 2025, will include major companies such as Albemarle Corp (ALB), Biogen Inc (BIIB), and Cisco Systems Inc (CSCO), among others.
On the date of publication, Rich Asplund did not have any positions in the securities mentioned in this article. Information and data are for informational purposes only. For further details, please refer to the Barchart Disclosure Policy here.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
