Tuesday’s losses in European markets and S&P 500 futures were compounded by data indicating that U.S. inflation decreased less than anticipated in January.
Lower Interest Rate
After the news, investors substantially reduced their wagers on how much the Federal Reserve would lower interest rates this year, which caused the dollar and U.S. Treasury yields to rise.
Nasdaq futures were down 1.64%, while U.S. S&P 500 futures were down 1.12%, continuing a decline of 0.35% prior to the report.
Due in part to the large technological businesses and the assumption that the Fed will soon lower rates, U.S. stocks have been trading at record highs.
The Stoxx 600 index for all of Europe was down 0.92% as of right now. Prior to the data, it had dropped 0.47%. Britain’s FTSE 100 declined by 0.44%, and Germany’s Dax plummeted by 0.91%.
The consumer price index (CPI), which measures inflation in the United States, decreased from 3.4% in December to 3.1% in January. Reuters polled economists, who predicted a lower reading of 2.9%.
The Fed decided to stop raising interest rates and consider cutting them as a result of the inflation rate declining from a peak of 9.1% in June 2022.
Fed Rate Cuts
Before the data, the yield on 10-year Treasury notes was 4.154%, but it has increased by 12 basis points to 4.291%.
Source- MARCA
The euro was down 0.39% at $1.073, while the dollar index, which compares the value of the US dollar to six competitors, surged quickly and was last up 0.41% at 104.57.
Prior to the data, investors were pricing in roughly 112 basis points of Fed rate cuts by the end of the year, but on Tuesday they were only putting in about 94.
Based on money market prices, they projected a 40% possibility of the first cut arriving by May, down from a previous 71%.
At the beginning of February, about 145 basis points of cuts were priced in; however, investors have lowered their expectations as a result of positive economic data.
