Inflation Rises and Stocks Slide on Hawkish Fed Comments
By The Personal Consumption Expenditures (PCE) price index — the Federal Reserve's preferred measure of inflation — rose 0.6% in January and 5.4% from last year.[0] On a “core” basis, which excludes volatile food and energy components, prices rose 0.6% for the month and 4.7% from last year.[0] This was the biggest monthly increase since June, indicating that stubbornly high inflation is taking its time to return to pre-pandemic levels.[1]
In the bond market, the 10-year Treasury yield (US10Y) fell 3 basis points to 3.93%, while the 2-year yield (US2Y) dipped about a basis point to 4.70%.[2]
Today at 10:00 a.m., new home sales figures will be released. It is anticipated that January's figure will indicate a 0.6% growth, much less than the 2.3% boost recorded in the prior month.[3]
At 10 a.m., traders are anticipating new home sales data. Dow Jones economists are expecting an increase of 0.6% in new home sales for the month of January.[4] The 2.3% increase from the previous month is a smaller increase.[3]
At the same time, forecasters see the personal income reading at +1.2% M/M compared to the expected +1.0% M/M level.[5] January personal spending is expected to come in at +1.2% M/M versus the anticipated +1.4% M/M. The revision of February Michigan consumer sentiment is expected to arrive at 66.4.[5]
Hawkish comments from Cleveland Fed President Mester weighed on stocks and pushed bond yields higher when she said the Fed is “going to have to do a little more to get back to price stability of 2%,” and she still sees raising the fed funds rate “somewhat” above 5% and staying there for a time.[6]
Stocks slumped after the hotter-than-estimated inflation reading bolstered the case for the Federal Reserve to keep rates higher for longer, which could make the odds of a soft landing look slimmer.[7] The S&P 500 experienced its worst weekly decline since early December, with the slide continuing.[7] The Nasdaq 100, which consists heavily of tech stocks, fell by approximately 2% as the two-year yield for the United States Treasury climbed to 4.8%, its highest point since[8] The dollar increased in value.[9]
0. “Stock market news today: Stocks slide after hotter-than-expected key inflation print” Yahoo News, 24 Feb. 2023, https://news.yahoo.com/stock-market-news-today-february-24-2023-104349492.html
1. “Dow falls more than 300 points after Fed’s favorite inflation gauge runs hotter than expected” MarketWatch, 24 Feb. 2023, https://www.marketwatch.com/story/u-s-stock-futures-weaken-ahead-of-key-inflation-data-efb982a2
2. “Dow Jones Dives 400 Points On Hot Inflation Report; Tesla Stock Skids” Investor's Business Daily, 24 Feb. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-fall-200-points-ahead-of-key-inflation-report/
3. “Stock Market News Today: Stocks in the Red after Hot Inflation Report” TipRanks, 24 Feb. 2023, https://www.tipranks.com/news/stock-market-news-today-futures-trend-down-ahead-of-key-economic-data
4. “Dow drops more than 400 points as a hot inflation report rattles Wall Street: Live updates” CNBC, 24 Feb. 2023, https://www.cnbc.com/2023/02/23/stock-market-today-live-updates.html
5. “Nasdaq, S&P, Dow fall on hot PCE inflation data” msnNOW, 24 Feb. 2023, https://www.msn.com/en-us/money/markets/nasdaq-sandp-dow-fall-on-hot-pce-inflation-data/ar-AA17T1gw
6. “Markets Today: Stock Indexes Fall as PCE Inflation Accelerates” Barchart, 24 Feb. 2023, https://www.barchart.com/story/news/14522916/markets-today-stock-indexes-fall-as-pce-inflation-accelerates
7. “Tech Crushed as Bond Yields Climb on Hot Inflation: Markets Wrap” Yahoo! Voices, 24 Feb. 2023, https://www.yahoo.com/now/asia-stocks-open-mixed-bumpy-224011362.html
8. “Markets Tumble on Inflation and Interest Rate Worries” Investopedia, 21 Feb. 2023, https://www.investopedia.com/markets-tumble-on-inflation-and-interest-rate-worries-7112267
9. “Stock Market Today: Dow, S&P Live Updates for Feb. 24” Bloomberg, 23 Feb. 2023, https://www.bloomberg.com/news/articles/2023-02-23/asia-stocks-to-open-mixed-after-bumpy-us-session-markets-wrap
