Stocks Slide and Bond Yields Spike on Strong CPI: Markets Wrap

(Bloomberg) — Stock futures fell and bond yields climbed after a stronger-than-anticipated inflation reading signaled the Federal Reserve will keep rates higher for longer.

S&P 500 contracts fell 1%. The yield on 10-year Treasuries advanced nine basis points to 4.63%. The Bloomberg Dollar Spot Index rose 0.4%. 

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The so-called core consumer price index — which excludes food and energy costs — increased 0.4% in January after a 0.2% advance in December, Bureau of Labor Statistics figures showed Wednesday. From a year ago, it rose 3.3%.

Wall Street’s Reaction:

• Michael Brown at Pepperstone:

These figures should see the Fed maintain their patient stance, being in no hurry to deliver another rate cut. Consequently, any rate reductions in the first half of 2025 now seem highly unlikely.

• Skyler Weinand at Regan Capital:

With this very strong CPI print, the Federal Reserve is on hold when it comes to interest rates for at least the remainder of 2025. Inflation and inflation expectations are both rising, which is something the Fed needs to counter by keeping rates higher for longer.

The Fed has nothing to do at this point but wait and see, and hope that the economic indicators change to suggest more progress on inflation.  If consumer prices or inflation expectations rise any further, it is quite possible that the Fed’s next move is to raise short term interest rates.

• Sameer Samana at Wells Fargo Investment Institute:

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).

We have been concerned about inflation as a risk for some time, and believe that while risk markets can go higher, it will be a choppier trajectory than the last two years.

Investors should use pullbacks to add to U.S. large-cap equities and the energy, financials, industrials, and communication services sectors.

We would also use moves higher on the 10 year treasury towards 4.5-5% to add to lengthen the duration of portfolios and lock in what we believe to be attractive yields.

Key events this week:

• Eurozone industrial production, Thursday
• US initial jobless claims, PPI, Thursday
• Eurozone GDP, Friday
• US retail sales, industrial production, business inventories, Friday
• Fed’s Lorie Logan speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 1% as of 8:43 a.m. New York time
• Nasdaq 100 futures fell 1.1%
• Futures on the Dow Jones Industrial Average fell 0.9%
• The Stoxx Europe 600 fell 0.3%
• The MSCI World Index fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%
• The euro fell 0.3% to $1.0327
• The British pound fell 0.5% to $1.2389
• The Japanese yen fell 1.2% to 154.35 per dollar

Cryptocurrencies

• Bitcoin fell 1.9% to $94,581.61
• Ether fell 1.2% to $2,591.97

Bonds

• The yield on 10-year Treasuries advanced nine basis points to 4.63%
• Germany’s 10-year yield advanced four basis points to 2.47%
• Britain’s 10-year yield advanced five basis points to 4.56%

Commodities

• West Texas Intermediate crude fell 1.1% to $72.48 a barrel
• Spot gold fell 0.9% to $2,872.48 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from John Viljoen, Sujata Rao, Allegra Catelli and Aya Wagatsuma.

©2025 Bloomberg L.P.