Stocks plunge following red-hot inflation print, Fed policymaker’s remarks

Selina Johansson

U.S. stocks were deep in the red on Thursday as Wall Street weighed another decades-high inflation print and remarks by St. Louis Federal Reserve President James Bullard that signaled the central bank could intervene more aggressively than anticipated to tighten monetary conditions amid surging prices levels.

[Click here to read how markets are trading Friday, Feb. 11]

The Dow Jones Industrial Average snapped a three-day winning streak closing down 500 points, or 1.5%, after comments from Bullard, who said in an interview that he favors an interest rate increase of 100 basis points by July 1. The S&P 500 was down 1.8% and the Nasdaq Composite, weighed down by losses in tech, shed 2.1%. Meanwhile, the closely-watched 10-year Treasury note jumped to 2% for the first time since August 2019.

“I typically take the opinions of St. Louis Fed president Jim Bullard with a grain of salt because he has a history of being all over the map with his forecasts and thoughts,” Bleakley Advisory Group CIO Peter Boockvar said in a note. “He does though vote this year and thus is very relevant to pay attention to.”

U.S. inflation accelerated last month in the fastest rise since 1982, with prices across a wide range of goods and services soaring further amid lingering shortages and supply chain disruptions. Consensus economists were looking for a 7.3% rise, according to Bloomberg data.

“While inflation continued to overshoot the Fed’s target in January, fundamental drivers of inflation are starting to improve,” Comercia Bank chief economist Bill Adams said in a note. “Remember, a big part of the surge in prices was from shortages, and the economy is making big strides to reduce shortages.”

Quadratic Capital Management founder Nancy Davis echoed a similar point in post-CPI commentary.

“While inflation is weighing heavily on Federal Reserve policy decisions, our current inflationary environment is unconventional and is caused largely by supply chain disruptions, something the Federal Reserve cannot fix with tighter monetary policy,” Davis said.

The 10-year Treasury yield’s jump to 2% pressured technology stocks in Thursday’s trading session. Losses in heavyweights such as Apple (AAPL) (closed down 2.34 to $172.16 per share) and Alphabet (GOOG) (closed down 2.02% to $22,772.05 per share) dragged down markets.

“Even though we see the yield curve start flattening, we are watching the 10-year very closely and the CPI number,” ERShares chief operating officer and chief investment strategist Eva Ados told Yahoo Finance Live on Wednesday, adding the three most significant facors in the data are costs associated with labor, food prices, and energy.

Ados said once the 10-year Treasury hits 2%, “that will trigger a psychological level and more anxiety in markets.”

In the previous session, the indexes were lifted by an influx of strong corporate earnings. The Walt Disney Company (DIS), a component of the Dow, unveiled first quarter 2022 results after the bell on Wednesday that sharply beat estimates. Better than expected growth for the entertainment giant’s streaming service Disney+ and a recovery in theme park attendance sent shares up as much as 9% after the report. Uber (UBER) also posted results after market close, revealing quarterly revenue that topped analyst forecasts and indicated headwinds caused by the Omicron COVID surge have eased.

“Last year, it was all about ‘tell me the story and how great it is,’ while this year, it’s ‘show me the money and show me that you’re growing profitably — that you have cash flow,’” Satori Fund founder and portfolio manager Dan Niles told Yahoo Finance Live.

After a surprise shift by the Federal Reserve on how aggressively it would tighten monetary conditions rocked equities in January, investors have found relief in strong earnings over recent weeks. Bank of America said in its latest update that S&P 500 earnings per share (EPS) are exceeding consensus expectations by 6% so far for the latest quarter and tracking toward a growth rate of well over 20% on a year-over-year basis.

But as earnings season winds down, investors will turn their attention back macroeconomic concerns, with special focus on Thursday’s inflation number — an annual CPI gain of 7.5% — at a 40-year high.

“We do think the focus shifts back to the macro side of the ledger this week,” Stuart Kaiser, UBS head of equity derivatives research, told Yahoo Finance Live on Tuesday, adding the European Central Bank and Bank of England are tightening monetary policy along with the Fed and a series of high inflation prints are expected in coming months. “When we put that all together, we don’t think the bumpy ride is over.”

4:00 p.m. ET: Wall Street’s main indexes cap session in negative territory

Here were the main moves in markets at Thursday’s close:

  • S&P 500 (^GSPC): -83.13 (-1.81%) to 4,504.05

  • Dow (^DJI): -526.37 (-1.47%) to 35,241.69

  • Nasdaq (^IXIC): -304.73 (-2.10%) to 14,185.64

  • Crude (CL=F): +$0.21 (+0.23%) to $89.87 a barrel

  • Gold (GC=F): -$8.90 (-0.48%) to $1,827.70 per ounce

  • 10-year Treasury (^TNX): +10.2 bps to yield 2.0310%

3:25 p.m. ET: Affirm plunges 33% after miss on revenue forecast

Buy now, pay later provider Affirm Holdings Inc. (AFRM) reported a larger loss for its second fiscal quarter due to an increase in stock-based compensation following the company’s initial public offering.

In the three months ended Dec. 31, net loss attributable to common shareholders widened to $159.74 million, or 57 cents per share, from a loss of $26.61 million, or 38 cents per share, a year earlier.

Shares plunged as much as 33% in afternoon trading. Affirm was down 19.35% to $60.23 per share as of 3:23p.m. ET.

Affirm also confirmed it mistakenly reported a portion of its second-quarter results ahead of schedule after a since-deleted tweet was sent from the company’s official Twitter account Thursday morning.

Affirm logo displayed on a phone screen and Affirm website displayed on a laptop screen are seen in this illustration photo taken in Krakow, Poland on August 16, 2021. (Photo by Jakub Porzycki/NurPhoto via Getty Images)

2:31 p.m. ET: Dow sheds 500 points as rate worries weigh on tech stocks

Here were the main moves in markets as of 2:31 p.m. ET:

  • S&P 500 (^GSPC): -66.45 (-1.45%) to 4,520.73

  • Dow (^DJI): -454.94 (-1.27%) to 35,313.12

  • Nasdaq (^IXIC): -215.12 (-1.48%) to 14,275.25

  • Crude (CL=F): -$0.11 (-0.12%) to $89.55 a barrel

  • Gold (GC=F): -$3.20 (-0.17%) to $1,833.40 per ounce

  • 10-year Treasury (^TNX): +9 bps to yield 2.0190%

1:05 p.m. ET: Dow tumbles after Fed president says he favors 100bp hike by July

Fed St. Louis President James Bullard said he favors interest rate increase of 100 basis points by July 1, including a 50 basis point hike as soon as March.

“I’d like to see 100 basis points in the bag by July 1,” Bullard, who is voting on monetary policy this year, said in an interview with Bloomberg News on Thursday. “I was already more hawkish but I have pulled up dramatically what I think the committee should do.”

The Dow Jones Industrial Average dropped 200 points following the remarks.

Bullard is said to be the most hawkish member of the Federal Open Markets Committee (FOMC). His take comes following another red-hot read on the Consumer Price Index (CPI), which notched a 7.5% annual gain in January.

12:13 p.m. ET: Stocks edge higher to pare earlier losses

Here were the main moves in markets during midday trading:

  • S&P 500 (^GSPC): -16.16 (-0.35%) to 4,571.02

  • Dow (^DJI): -76.11 (-0.21%) to 35,691.95

  • Nasdaq (^IXIC): -46.31 (-0.32%) to 14,444.06

  • Crude (CL=F): +$1.86 (+2.07%) to $91.52 a barrel

  • Gold (GC=F): +$5.80 (+0.32%) to $1,842.40 per ounce

  • 10-year Treasury (^TNX): +8.1 bps to yield 2.0100%

9:30 a.m. ET: US stocks falter as Wall Street weighs decades-high CPI print

Here were the main moves in markets at the start of Thursday’s session:

  • S&P 500 (^GSPC): -54.84 (-1.20%) to 4,532.34

  • Dow (^DJI): -262.99 (-0.74%) to 35,505.07

  • Nasdaq (^IXIC): -258.68 (-1.79%) to 14,231.69

  • Crude (CL=F): -$0.22 (-0.25%) to $89.44 a barrel

  • Gold (GC=F): -$7.50 (-0.41%) to $1,829.10 per ounce

  • 10-year Treasury (^TNX): +5.3 bps to yield 1.9820%

8:55 a.m. ET: Stock futures tumble after red-hot inflation data

Here’s how stock futures fared as investors mulled the latest CPI report

  • S&P 500 futures (ES=F): -37.75 points (-0.82%), to 4,540.00

  • Dow futures (YM=F): -139 points (-0.39%), to 35,502.00

  • Nasdaq futures (NQ=F): -192.00 points (-0.28%) to 14,846.25

8:30 a.m. ET: Inflation reaches fresh 40-year high

U.S. inflation accelerated in January, with prices across a wide range of goods and services soaring further amid lingering shortages and supply chain disruptions.

The Consumer Price Index (CPI) released by the Bureau of Labor Statistics Thursday morning registered a 7.5% annual gain in January. Consensus economists were looking for a 7.3% rise, according to Bloomberg data. This represented the fastest rise since 1982, as well as an acceleration from the 7.0% year-over-year increase seen in December.

Energy prices remained a key contributor to the overall CPI and were up by 27% on a year-over-year basis in January. Within energy, fuel oil prices jumped 9.5% on a monthly basis, tracking the rise in crude oil prices, which rallied to a seven-year high at the beginning of the year. Electricity prices also jumped by a pronounced 4.2% on a month-over-month basis.

8:30: a.m. ET: Jobless claims decline as Omicron labor market disruptions ease

First-time unemployment filings came in lower in the latest weekly data, continuing a recent downward trend in jobless claims as Omicron-related pressures on the labor market begin to abate. Another 223,000 Americans filed new claims for the week ended Feb. 5, below expectations of 230,000.

Filings for unemployment insurance have fallen consistently in recent weeks after a temporary surge in mid-January to a print of nearly 300,000, the highest level since October. The rush of U.S. workers applying for benefits was attributed to disruptions from the Omicron variant of COVID-19 and adjusted workforces following the seasonal hiring increase at the end of 2021.

7:00 a.m. ET: Contracts on Wall Street’s main benchmarks flat ahead of CPI print

Here were the main moves in futures trading ahead of Thursday’s open

  • S&P 500 futures (ES=F): -72.50 points (-0.16%), to 4,570.50

  • Dow futures (YM=F): +32.00 points (+0.09%), to 35,673.00

  • Nasdaq futures (NQ=F): -43.75 points (-0.29%) to 14,994.50

  • Crude (CL=F): +$0.96 (+1.07%) to $90.62 a barrel

  • Gold (GC=F): -$3.00 (-0.16%) to $1,833.60 per ounce

  • 10-year Treasury (^TNX): -0.00 bps to yield 1.9290%

6:00 p.m. ET Wednesday: Stock futures rise slightly ahead of key inflation data

Here’s how the key indexes fared in post-market trading Wednesday:

  • S&P 500 futures (ES=F): +4.00 points (+0.09%), to 4,581.75

  • Dow futures (YM=F): +78.00 points (+0.22%), to 35,719.00

  • Nasdaq futures (NQ=F): +15.50 points (+0.10%) to 15,038.25

  • Crude (CL=F): +$0.31 (+0.35%) to $89.97 a barrel

  • Gold (GC=F): +$2.60 (+0.14%) to $1,833.60 per ounce

  • 10-year Treasury (^TNX): -2.5 bps to yield 1.9290%

A trader works on the floor of the New York Stock Exchange at the closing bell January 14, 2022, in New York, New York. (Photo by TIMOTHY A. CLARY / AFP) (Photo by TIMOTHY A. CLARY/AFP via Getty Images)

A trader works on the floor of the New York Stock Exchange at the closing bell January 14, 2022, in New York, New York. (Photo by TIMOTHY A. CLARY / AFP) (Photo by TIMOTHY A. CLARY/AFP via Getty Images)

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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