Stocks ended lower Wednesday as investors picked through a hotter-than-expected January inflation report while bracing for another round of tariff announcements from President Donald Trump.
The Dow Jones Industrial Average tumbled 225.09 points, or 0.5%, to finished the session at 44,368.56, while the S&P 500 lost 0.27% to close at 6,051.97 and the tech-heavy Nasdaq squeaked up 0.03% to close at 19,649.95
Regarding consumer prices, Jamie Cox, managing partner for Harris Financial Group, said “lack of progress on inflation is the story here—this is not the start of a resurgence in inflation.”
"If these levels of inflation persist, the Fed will be on hold until October," he said. "Food and Energy are big players in the hot reads, so there’s a chance we get a little reprieve in the spring."
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Updated at 12:33 PM EST
The elephant in the room
Fed Chairman Jerome Powell's second day of testimony on Capitol Hill, this time in front of the House Financial Services Committee, repeated his "higher for longer" message on rates while noting, for the first time, the likely inflationary impact from new tariff announcements.
Powell told lawmakers that the central bank could "possibly" need to change policy rates on the basis of trade policy, adding he and his colleagues were attempting to forecast the impact of tariffs on inflation pressures.
"The Fed has no roll in setting tariffs," Powell said. "It's possible the economy could evolve in ways that because of tariffs...we would need to do something with our policy rate, but we can't know what that is until we actually know what policies are enacted."
J Powell is being much more deferential to Trump and Trumps policies than he was in his first term.
— Kip Herriage (@KHerriage) February 12, 2025
Quote “Trump was elected to enact his policies on tariffs, immigration and fiscal policy. It’s not the Feds job to question the wisdom of congressional action or Trumps…
Updated at 10:41 AM EST
Watch the bonds
Treasury yields are holding their recent advance into the morning session, with 10-year notes trading at 4.654% following the hotter-than-expected inflation report and ahead of a $42 billion auction in new benchmark paper later this afternoon.
Benchmark 2-year notes, meanwhile, were last marked at 4.367%, a notable level in that it sits just below the Fed's effective funding rate of 4.375%.
Stocks are paring their earlier slump, however, with the S&P 500 last marked 22 points lower on the session, with the Nasdaq down 31 points.
"Higher-for-longer may have just gotten a little longer," said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
"The Fed has been waiting for clear signs that inflation is trending lower again, and this morning they got the opposite," she added. "Until that changes, the markets are going to have to remain patient about additional rate cuts."
Related: CPI inflation shock hammers Fed rate cut bets for 2025
Updated at 9:32 AM EST
Big slide
The S&P 500 was marked 60 points, or 1% lower in the opening minutes of trading, with the Nasdaq falling 224 points, or 1.12%.
The Dow was marked 396 points lower while the mid-cap Russell 2000 fell 34 points or 1.5% following the hotter-than-expected CPI release.
"The immediate reaction to today’s report will likely weigh on stocks in the short term, as a higher-than-expected print further lowers the odds of rate cuts from the Fed this year and stokes investors’ reflationary fears," said Bret Kenwell, U.S. investment analyst at eToro.
"That said, we do tend to see higher inflation numbers at the start of the year, while investors have to wonder if companies were front-loading their orders to get ahead of potential tariffs that had the potential to go into effect later this quarter," he added. "Ultimately, it will take a few more reports to see how any of these potential trends take shape, which could pave way for near-term uncertainty."
S&P 500 Opening Bell Heatmap (Feb. 12, 2025)$SPY -1.09% 🟥$QQQ -1.12% 🟥$DJI -0.87% 🟥$IWM -1.68% 🟥 pic.twitter.com/yvsYvauN4n
— Wall St Engine (@wallstengine) February 12, 2025
Updated at 8:41 AM EST
Inflation redux
U.S. inflation ticked surprisingly higher in January, data indicated Wednesday, sending stocks sharply lower as price pressures remained stubbornly elevated even prior to the impact of new trade tariffs put in place by President Donald Trump.
The Commerce Department said its headline Consumer Price Index for January was pegged at an annual rate of 3%, accelerating from the 2.9% pace recorded in December and the fastest level since May.
So-called core inflation, which strips out volatile components like food and energy, quickened to an annual rate of 3.3%, topping Wall Street's 3.1% forecast and pegged at the highest rate since May.
U.S. stocks extended declines following the data release, with futures contracts tied to the S&P 500 indicating a 60 point decline and those linked to the Nasdaq priced for a 230 points slide. The Dow was last called 445 points lower.
Benchmark 2-year Treasury note yields rose 7 basis points to 4.363% while 10-year notes jumped 7 basis points to 4.619%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.5% higher at 108.441.
Headline CPI was 0.47%, also above expectations. This dragged the 12-month rate up to 3% (vs 2.9% in Dec)
— Nick Timiraos (@NickTimiraos) February 12, 2025
The six-month annualized rate was 3.6% (vs. 2.9% in Dec) and the three-month annualized rate was 4.5% (up from 3.5%). pic.twitter.com/Yh2KtWcC3m
Updated at 8:11 AM EST
Jawboning rates
President Trump renewed his call for lower interest rates, posting through his Truth Social social media account that a Federal Reserve rate cut would go "hand in hand" with is recent tariff announcements.
The post comes just 30 minutes ahead of the January CPI inflation release, which is expected to show headline price pressures holding at 2.9% on an annual basis, but easing to around 0.3% when compared to December.
Core prices, meanwhile, are expected to ease to 0.3% on the month and to a year-on-year rate of 3.1%.
🇺🇸 🇺🇸 Are you listening Mr Powell ?? pic.twitter.com/qDtDfuipmP
— Trading Floor Audio (@TradeFloorAudio) February 12, 2025
Updated at 7:43 AM EST
CVS healthy?
CVS Health (CVS) shares soared in premarket trading after the health insurance and retail pharmacy giant posted its strongest quarterly profit beat in four years and suggested its medical costs may have peaked.
CVS posted fourth-quarter earnings of $1.19 a share, topping the Wall Street consensus forecast by 26 cents, as well as a quarter-on-quarter narrowing of its medical-benefits expense ratio, which tracks payouts on claims relative to the premiums it collects.
"We have continued to see growth in key areas of our business, including the Pharmacy and Consumer Wellness segment, while we address the industrywide challenges that have impacted our Health Care Benefits segment," said new CEO David Joyner.
CVS shares were marked 12% higher in premarket trading to indicate an opening bell price of $61.85.
Related: CVS Health stock soars on surprise boost from health insurance unit
Stock Market Today
Stocks ended mixed on Tuesday, with a notable slump for Tesla (TSLA) pulling the Nasdaq into the red by the close of trading while the Dow and the S&P 500 notched modest gains following an uneventful appearance from Federal Reserve Chairman Jerome Powell in front of the Senate Banking Committee.
Powell, who faces another round of questions from the House Financial Services Committee this morning, echoed the Fed's recent messaging on growth, inflation and the labor market and repeated his view that the central bank is in "no hurry" to lower its benchmark borrowing rate.
“The economy is strong, growing 2.5% last year. The labor market is also very solid. Unemployment at 4% is quite a low level. Inflation last year was 2.6% for the year,” Powell told lawmakers.
“So we’re in a pretty good place with this economy. We want to make more progress on inflation, and we think our policy rate is in a good place. We don’t see any reason to be in a hurry to reduce it further,” he added.
Questions in today's session, however, could be more pointed as Powell will appear following a key January consumer-inflation reading at 8:30 a.m. Eastern Time that's expected to show a modest easing in core price pressures and little change in the headline reading.
Olivier Douliery/Bloomberg via Getty Images
"While Wednesday's CPI is an important input into the Federal Reserve's thinking on rates, we may be six to eight months away from the next rate cut, so it's premature to put much weighting on what this data point means for the Fed," said Michael Rosner, managing director at Raymond James in Birmingham, Michigan.
"Barring any major changes to the near-term economic data, we don't think the Fed is going to pivot from its 'wait and see' approach on rates," he added.
Related: Analyst resets Tesla stock forecast as Musk targets OpenAI
Benchmark 10-year Treasury bond yields were holding steady at 4.543% in overnight trading ahead of today's CPI inflation report and the auction of $42 billion in new notes later in the session.
The U.S. dollar index, meanwhile, was marked 0.02% higher against a basket of six global currency peers and changing hands at 107.988, as investors awaited details of a fresh round of reciprocal tariffs from Trump.
Trump, who unveiled new steel and aluminum levies earlier this week, has said he will increase duties on goods from countries that tariff U.S. exports, stoking further concerns for the potential of a tit-for-tat trade war.
On Wall Street, stocks are set for a modestly weaker open, with futures contracts tied to the S&P 500 priced for a 7-point dip and those linked to the Dow Jones Industrial Average indicated 70 points lower.
The tech-focused Nasdaq, meanwhile, is called 5 points lower, with Tesla, Super Micro Computer (SMCI) , Intel (INTC) and Nvidia (NVDA) active in early trading.
More Wall Street Analysis:
- Goldman Sachs analysts warn on Trump tariff impact for stocks
- Analyst predicts stocks likely to join the S&P 500 in 2025
- Every major Wall Street analyst's S&P 500 forecast for 2025
In overseas markets, Europe's Stoxx 600 was marked 0.18% higher in midday Frankfurt trading, with Britain's FTSE 100 edging 0.02% higher in London.
Overnight in Asia, Japan's Nikkei 225 returned from its mid-February holiday to rise 0.42% by the close of trading, while the regional MSCI ex-Japan benchmark rose 0.77%.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
