(Bloomberg) – The shares were beaten and the bond returns have risen, as hot inflation data stimulated the bets that the federal reserve will not have a lot of space to reduce this year.
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Each major group decreased in the S&P 500, with a decrease in the scale about 1 %. Treasury bonds fell across the curve, as revenues increased for 10 years by more than 10 basis points. Financial markets have adjusted the bets on cuts in the prices of the Federal Reserve, which now expect the first reduction – and only in 2025 – in December. The dollar rose against all its counterparts in the advanced market.
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Inflation in the United States increased widely at the beginning of the year, with the increase in the monthly consumer price index in January by more than August 2023. Speaking to American lawmakers on Wednesday, Federal Reserve Chairman Jerome Powell said the latest data show that we are close, however It is not close there to inflation. He also pointed out that officials want to maintain the restriction of policy at the present time.
“The inflation report today will make a very uncomfortable reading to study the Federal Reserve,” Sima Shah said in the main asset management. “If this continues in the next few months, the risk of inflation may become very likely to the upward trend to allow the Federal Reserve to reduce prices ever this year.”
Chris Zakarili in North Direight Asset Management, although it is too early to predict that officials start raising prices anytime, the market will start thinking seriously that the next step by the Federal Reserve – even if it is in late 2025 or or Early 2026 – it will be a height, not definitely.
“The market is likely to have a negative reaction to the knee to the increasing risks of” upper tolerance “or even” higher than “. So there is something that justifies caution.”
S&P decreased 0.7 %. Nasdak 100 lost 0.5 %. Dow Jones Industrial Mediterranean slipped 1 %.
The return on the treasury bonds for 10 years is offered 11 basis points to 4.65 %. The Bloomberg index in dollars increased by 0.3 %.
Wall Street reaction:
The number of the higher consumer price index took this morning (after the upper inflation component of the recruitment report for this week, along with concerns about the definitions), due to the 10 -year observation above the direction line starting last September.
If we see any other movement in the upward direction as we move until February, it will already give us an affirmation that long -term returns will remain “longer for a longer period” to move forward.
This does not mean that they will pay up to 5 % soon … nor that these returns will not decrease at some point later this year. However, it should raise fears that the Federal Reserve will wait a little longer to reduce short -term rates than the street was thinking until recently … and also raises fears that Minister Besand’s goal is the low long -term return will take longer to achieve. Good.
We do not expect any immediate change in the FBI policy, but if there is a series of 2-3 above the expected inflation reports, it may pressure the Federal Reserve to raise prices.
In the short term, we expect high bond returns and higher fluctuations in stock markets. Investors must monitor the US treasury return for 10 years. Any step closer to or higher than 4.80 % can create negative opposite winds in the short term of stocks.
We are still optimistic about the stock markets for 2025, with the price goal at the end of the year for the S&P 500 out of 6800, but the potential tariff and/or increased inflation can create the opposite wind.
January was hot, hot, hot-inflation: given the monthly monthly numbers, or the numbers on an annual basis on both the main address and the basic rates of inflation, the consumer price index came hotter than expected. This represents a retreat from the trip towards low prices and price stability. “
There is more inflation and employment data for digestion before the next scheduled announcement from the Federal Reserve on March 19. It is difficult to clarify the issue to reduce prices at this stage.
At the present time, it is a “wait and see” approach to the President of the Federal Reserve, Jay Powell and his colleagues, who realize that the issue for further mitigation in the short term has decreased. It does not seem to be high prices on the table, but the continuous recovery in inflation may change this.
The Federal Reserve will wait for “Wait and Look” for a longer period than expected after the inflation report at the Red Consumer Prices Index in January. Prices jumped more than expected and in a broad -base manner that corresponds to yesterday’s comments from President Powell that the Federal Reserve is not “in a hurry” to control interest rates. This report puts the final nail of the coffin for the price reduction cycle, which we believe has ended.
The most hot prints of the investor expectations of monetary policy, which add to the long -term interest rates and pressure on stocks. However, not all shares are equally affected, as more debt companies face the opposite winds from higher rates while others will eventually benefit from higher revenues because they are able to impose more of their products. We believe that the value should exceed growth in such an environment.
Today’s data confirms that Powell’s decision to put price cuts on the rear stove for a long period of time. In general, the inflation data today must force the market to rethink the ability of the Federal Reserve to reduce prices this year, especially given that the high prices are not related to any introductory activity from the White House.
The release of the most powerful consumer price index is likely to enhance FOMC’s cautious approach to alleviation. The flexible labor market also provides room for patience. We believe that the Federal Reserve is likely to “wait and see the situation” at the present time and expects that the Federal Reserve will be held at the meeting next month.
It is possible that equal inflation will prevent the federal reserve from cutting rates soon, which in turn will lead to the strongest dollar. The strength of the dollar can help compensate for some inflationary pressures in the economy and the tariff. It also makes us attractive in the cabinet, which helps to alleviate some rising pressure on the returns.
These numbers should see that the Federal Reserve maintains their position on the patient, as they are not in a hurry to deliver another rate. Thus, any discounts in the first half of 2025 now seem very unlikely.
With this powerful printing in the consumer price index, the Federal Reserve is suspended when it comes to interest rates at least the rest of 2025. inflation and inflation expectations are high, something that the Federal Reserve needs to face rates for a longer period.
The Federal Reserve did not have what it is doing at this stage, but he waited and sees, and we hope that economic indicators will change to propose more progress in inflation. If consumer prices or inflation expectations rise beyond that, it is completely possible that the next step in the Federal Reserve is to raise short -term interest rates.
The hottest consumer price index confirms that investors are expected to be concerned about hot inflation that will maintain the Federal Reserve on the margin (unlike reducing rates).
We were concerned about inflation as a while for some time, and we believe that although risk markets can rise, it will be a intermittent path from the past two years.
Investors must use declining operations to add to the shares of large United States, energy, finance, industries and telecommunications services.
We will also use the movements higher in the cabinet for 10 years about 4.5-5 % to add to prolong the duration of the portfolio and lock what we think is attractive yield.
The most prominent companies:
Kraft Heinz said it will deduct the main elements next year while improving products and increasing marketing to compete for customers with inflation.
Doordash Inc. , The largest food delivery service in the United States, a future view of orders in the first quarter that exceeded Wall Street’s expectations, as it was another sign that the consumer’s request remains flexible.
CVS Health Corp has increased more than more than 25 years after their results in the fourth quarter indicated improving performance from the company that fights insurance and structure.
Spirit Airlines Inc. A recovery acquisition of Carrier Front Group Group Holdings, saying that it will instead continues to restructuring the bankruptcy.
Bigen Inc. expects. A greater decrease in annual sales than Wall Street, which adjusts the completion of the strong drug maker until 2024.
The main events this week:
Industrial production in the euro area, Thursday
Calls for the unemployed for American initial work, PPI, Thursday
GDP in the euro area, Friday
American retail sales, industrial production, business inventory lists, Friday
Lori Logan speaks in Fad
Some of the main moves in the markets:
Shares
S&P 500 decreased by 0.7 % as of 11:24 am
Nasdaq 100 0.5 % decreased
Dow Jones Industrial Average decreased 1 %
Stoxx EUROPE 600 did not change slightly
The MSCI World Index decreased by 0.6 %
Currency
The Bloomberg index in dollars increased by 0.3 %
The euro did not change a little at $ 1.0356
The British pound decreased by 0.3 % to $ 1.2406
The Japanese yen decreased by 1.5 % to 154.76 per dollar
Cross currencies
Bitcoin fell 0.9 % to 95,480.79 dollars
Al -Atheer decreased by 1.1 % to $ 2,592.66
Bonds
The return on the treasury bonds is offered for 10 years, 11 basis points to 4.65 %
Germany’s return for 10 years has advanced five basis points to 2.48 %
The British return for 10 years is providing five basis points to 4.56 %
Commodity
West Texas Intermediate crude decreased by 1.6 % to $ 72.17 a barrel
Gold fell 0.2 % to 2,892.54 ounces
This story was produced with the help of Bloomberg’s Option.
–With Assistance from Lu Wang, John Viljoen, Sujata Rao, Algra Catelli and Aya Wagatsuma.
