Traders work on the floor of the New York Stock Exchange (NYSE) during morning trading on January 26, 2023 in New York City.
Michael M. Santiago | Getty Images
Stock futures dropped on Tuesday after hotter-than-expected inflation data for January spiked Treasury yields and raised doubts that the Federal Reserve would be able to cut rates several times this year, a key part of the bull case for the equity market.
Futures tied to the Dow Jones Industrial Average lost 327 points, or 0.9%. S&P 500 futures slid 1.2%, while Nasdaq 100 futures dropped 1.7%.
The consumer price index rose 0.3% in January from December. CPI was up 3.1% on an annual basis. Economists polled by Dow Jones expected CPI to have increased by 0.2% month over month in January and 2.9% from a year earlier.
Core prices, which exclude volatile food and energy components, rose 0.4% month over month and 3.9% from a year ago. Core CPI was expected to have increased 0.3% in January and 3.7% from a year earlier, respectively.
“This may well come as a easy excuse to take some of the froth out of the top of this market that’s been universally higher thus far this year,” said Art Hogan, chief market strategist at B. Riley Financial. “The CPI was, as reported today, just a touch hotter than expectations and proof positive that we’re not on a linear path, but we’re on a path headed lower.”
The 2-year Treasury yield jumped above 4.6% and the 10-year yield topped 4.27% following the CPI data. Tech shares including Nvidia, Microsoft and Amazon, which have led the market run to record highs as rates declined, led the losses in early trading Tuesday. All three were off by more than 1% in premarket trading.
Wall Street is coming off a mixed session in which the Dow closed at a record, while the S&P 500 ended the day down slightly along with the Nasdaq. All three of the major averages are riding a five-week winning streak.
In corporate news, JetBlue Airways spiked 15% after activist investor Carl Icahn reported a nearly 10% stake in the airline. Toymaker Hasbro plunged more than 12% after missing analyst expectations for the fourth quarter. Similarly, shares of Avis Budget Group slipped 1.8% premarket on the back of disappointing fourth-quarter revenue.