Stocks wavered Tuesday and the Dow fell, reversing earlier gains, after the January consumer price index report showed that inflation grew at higher-than-expected 6.4% annual rate.
The Dow Jones Industrial Average slipped 156.66 points, or 0.46%, to close at 34,089.27. The S&P 500 fell 0.03% to 4,136.13. The Nasdaq Composite recouped earlier losses to close 0.57% higher at 11,960.15, boosted by technology stocks including Tesla and Nvidia, which rose 7.51% and 5.43%, respectively.
Before the number was released, JPMorgan’s trading desk predicted that an annual increase of 6.4% to 6.5% would trigger an S&P 500 loss of about 1.5% on Tuesday. It was better than the worst fears of an annual increase exceeding 6.5%, an acceleration in inflation that could have triggered an S&P 500 decline of 2.5%, JPMorgan predicted.
The report was largely better than feared, but at the same time unlikely to cause the Fed to back off from its tightening campaign.
“While there were no major surprises in today’s CPI reading, it is a reminder that while inflation has peaked it could be a while before we see it moderate to normal levels,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.
“The question remains if inflation will be able to fall to the Fed’s target levels with the labor market as tight as it currently is,” he added. “That could be the recipe for a soft landing, but it remains to be seen when the Fed will shift away from rate hikes and if the labor market will lose its resiliency.”
Beyond the CPI, investors will also be watching for earnings for insights into the health of the consumer. Kraft Heinz, Boston Beer and DoorDash are all scheduled to report this week.
Lea la cobertura del mercado de hoy en español aquí.
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