US stocks fall as CPI rises

US stocks 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.

The Dow Jones Industrial Average lost 524.63 points, or 1.35 per cent, to close at 38,272.75 in its worst session since March 2023 on a percentage basis. At its lows, the 30-stock index sunk 757.52 points, or 1.95 per cent. The S&P 500 slid 1.37 per cent to close at 4,953.17, while the Nasdaq Composite fell 1.8 per cent to settle at 15,655.60.

The Russell 2000 also suffered, tumbling nearly 4 per cent for its worst session since June 2022.

The consumer price index rose 0.3 per cent in January from December. CPI was up 3.1 per cent on an annual basis. Economists polled by Dow Jones expected CPI to have increased by 0.2 per cent month over month in January and 2.9 per cent from a year earlier.

Core prices, which exclude volatile food and energy components, rose 0.4 per cent month over month and 3.9 per cent from a year ago. Core CPI was expected to have increased 0.3 per cent in January and 3.7 per cent from a year earlier, respectively.

The 2-year Treasury yield jumped above 4.63 per cent, and the 10-year yield topped 4.29 per cent following the CPI data.

In corporate news, JetBlue Airways spiked almost 22 per cent after activist investor Carl Icahn reported a nearly 10 per cent stake in the airline. Toymaker Hasbro lost 1.4 per cent after missing analyst expectations for the fourth quarter. Shares of Avis Budget Group slipped about 23 per cent on the back of disappointing fourth-quarter revenue.

The VIX Volatility Index surged to its highest level in three months, reaching 16.50 in late afternoon trading on Tuesday, surpassing its 200-day moving average of 15.08 and significantly exceeding the session low of 13.43. According to the CBOE, the VIX represents a 30-day expected volatility measure of the U.S. stock market, calculated from S&P 500 Index options prices, and has consistently traded above its 50-day moving average of 13.18.

Turning to commodities, recent supply cuts by Kazatomprom have prompted support for new uranium projects, with developers anticipating improved price outlooks and increased interest in supply agreements. CEOs of companies like Bannerman Energy Ltd and Deep Yellow Limited foresee sustained high prices for uranium over the next decade, driven by increased demand as countries like China, Japan, South Korea, and France expand their nuclear power capacities.

Turning to US sectors, all closed lower overnight. Health recorded the fewest losses, whilst Consumer Discretionary was the worst performer.

Futures

The SPI futures are pointing to a 1.2 per cent fall.

Currency

One Australian dollar at 8.25am was buying 64.53 US cents.

Commodities

Gold lost 1.35 per cent. Silver dropped 2.89 per cent. Copper fell 0.42 per cent. Oil added 1.12 per cent.

Figures around the globe

European markets closed lower. London’s FTSE fell 0.81 per cent, Frankfurt lost 0.92 per cent, and Paris closed 0.84 per cent lower.

Turning to Asian markets, Tokyo’s Nikkei gained 2.89 per cent, Hong Kong’s Hang Seng and China’s Shanghai Composite were closed.

Yesterday, the Australian share market closed 0.15 per cent lower at 7,603.58.

Ex-dividends
Dicker Data (ASX:DDR) is paying 15 cents fully franked
Plato Inc Max (ASX:PL8) is paying 0.55 cents fully franked
VGI Partners Global (ASX:VG1) is paying 5 cents fully franked

Dividends payable
Mayfield Group Holdings Ltd (ASX:MYG)
Charter Hall Long WALE REIT (ASX:CLW)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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