Investors braced themselves as the US stock market plunged at the opening bell this Wednesday, shaken by an unexpected surge in consumer prices revealed in the latest inflation report.
Futures trading indicated a turbulent start to the day, with the Dow Jones Industrial Average (^DJI) plummeting over 1%, and both the S&P 500 (^GSPC) and the Nasdaq 100 (^NDX) shedding more than 1.25% each.
Adding to the anxiety, bond yields soared, with the 10-year Treasury yield (^TNX) spiking as much as 14 basis points in early morning trading, crossing the 4.5% threshold for the first time this year.
March’s Consumer Price Index (CPI) painted a stark picture, showing a 0.4% increase over the previous month and a notable 3.5% surge over the prior year. These figures, outpacing economists’ forecasts of a 0.3% monthly rise and a 3.4% annual increase, as reported by Bloomberg, sent shockwaves through the markets.
The unexpected spike in inflation could reshape investors’ expectations regarding the Federal Reserve’s monetary policy. With the surge in consumer prices indicating potential upward pressure on interest rates, around 75% of bets are now on the Fed maintaining current rate levels in June, according to the CME FedWatch tool. Moreover, a majority of investors anticipate a steady stance from the central bank through its July meeting.
Attention now turns to the minutes from the Fed’s March meeting, eagerly awaited for any signs of wavering in policymakers’ stance on rate adjustments.
As the first-quarter earnings season gets underway, all eyes are on corporate performance amidst the backdrop of economic uncertainty. Delta (DAL) took the spotlight with its premarket earnings announcement, surpassing expectations and driving its shares up nearly 5%. However, the aviation industry remains under scrutiny due to lingering repercussions from Boeing’s (BA) ongoing challenges.
Looking ahead, investors await earnings reports from major Wall Street banks on Friday, though forecasts suggest tempered profits despite hopes for a robust season.
Amidst market jitters and economic volatility, investors brace for a rollercoaster ride as they navigate the evolving landscape of inflationary pressures and corporate earnings.
