Wall St slides as inflation data, policymakers stoke rate worries

15 Feb, 2023

NEW YORK: Wall Street’s main indexes slid on Tuesday after data showed consumer prices accelerated in January, while hawkish remarks from Federal Reserve officials cemented fears that the central bank will continue raising interest rates this year.

Data showed US consumer prices accelerated in January as Americans continued to be burdened by higher costs for rental housing, suggesting that the Fed was far from pausing its rate increase campaign.

The consumer price index increased 0.5% last month after gaining 0.1% in December, the Labor Department said. In the 12 months through January, the CPI increased 6.4%, more than the 6.2% forecast by economists.

“The number would lead me to believe that they (Fed officials) are not going to change what they have said, which is there’s more work to be done and I think that’s true,” Andrew Slimmon, managing director at Morgan Stanley Investment said.

Money market traders are betting on at least two more 25 basis point rate hikes this year, with interest rates seen peaking at 5.28% by July.

Further adding to the investor angst were hawkish remarks by Richmond Fed President Thomas Barkin and Dallas Fed President Lorie Logan , with Barkin stating that the Fed needs to prioritize quashing inflation over risks to US economic growth.

Wall Street has had an upbeat start to the year, driven by a renewed interest in growth stocks that were battered in 2022 as the Fed raised rates aggressively to bring steep prices under control.

The rally, however, stalled last week following signs of a tight labor market and hawkish commentary from Fed policymakers.

Investors will closely watch January retail sales data on Wednesday for hints on consumer spending amid worries of an economic slowdown.

At 12:10 p.m. ET, the Dow Jones Industrial Average was down 265.68 points, or 0.78%, at 33,980.25, the S&P 500 was down 22.83 points, or 0.55%, at 4,114.46, and the Nasdaq Composite was down 47.30 points, or 0.40%, at 11,844.49.

Among single stocks, Coca-Cola Co slipped 1.3% despite a strong full-year profit forecast.

Marriott International Inc rose 2.0% after the hotel operator forecast first-quarter earnings above Wall Street estimates as it benefited from strong travel demand.

Palantir Technologies soared 13.1% after the data analytics firm forecast its first profitable year.

Nearly 69% of more than half of the S&P 500 firms that have reported results have beaten profit expectations, as per Refinitiv on Friday. However, analysts expect fourth-quarter earnings to fall 2.8% from a year earlier.

Declining issues outnumbered advancers for a 2.14-to-1 ratio on the NYSE and a 1.91-to-1 ratio on the Nasdaq.

The S&P index recorded 10 new 52-week highs and no new low, while the Nasdaq recorded 56 new highs and 60 new lows.

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