Investing.com-- The S&P 500 fell Wednesday, after data showing an unexpected pick up in inflation further narrowed the path for Federal Reserve rate cuts.
At 4:00 p.m ET (21:00 GMT), the Dow Jones Industrial Average slipped 224 points, or 0.5%, the S&P 500 index fell 0.3%, and the NASDAQ Composite rose 0.03%.
Consumer inflation surges; bets on Fed pause grow
U.S. consumer prices rose by more than expected in January, pointing to lingering inflationary pressures to point the Federal Reserve to think carefully before future potential interest rate reductions.
Headline consumer prices increased by 3.0% in the twelve months to January, above expectations that the reading would match December’s pace of 2.9%. Month-on-month, the gauge unexpectedly accelerated to 0.5%, up from 0.4% in the prior month and faster than economists’ expectations of 0.3%.
The ’core’ measure, which excludes volatile elements like food and energy, also rose more than expected, climbing 0.4% on the month and 3.3% on the year, above the expected 0.3% and 3.1%, respectively.
Macquarie said that the surprise in inflation "further reinforces this call" for a long pause on Fed rate cuts for 2025.
Inflation has slowed steadily since a post-pandemic surge, but Fed Chair Jerome Powell told the Senate Banking Committee on Tuesday that the central bank was in no hurry to cut interest rates, given that it had already trimmed rates by 1% in 2024, and that the economy remained strong.
In his second-day of testimony before Congress, Powell said that the Fed wants to keep monetary policy "restrictive for now," noting that while inflation is closing on the U.S. central bank’s 2% target it isn’t there yet.
Cisco leads the earnings parade
Cisco Systems (NASDAQ:CSCO) is due to report its quarterly earnings after the closing bell on Wednesday, with analysts on the lookout for developments around artificial intelligence-powered demand for the group’s networking gear.
CVS Health (NYSE:CVS) stock soared 15% after the pharmacy chain reported fourth-quarter revenue and profit that topped estimates, even as its troubled insurance business continued to see higher medical costs.
DoorDash (NASDAQ:DASH) stock rose over 4% after the food delivery company reported better-than-expected revenue for the fourth quarter after the close Tuesday.
Super Micro Computer (NASDAQ:SMCI) stock gained nearly 3% premarket despite the server maker cutting its annual revenue forecast, adding that it believes it will be able to file delayed annual and quarterly reports with the Securities and Exchange Commission by Feb. 25, after being accused by short seller Hindenburg Research of "accounting manipulation" in August.
Gilead Sciences (NASDAQ:GILD) stock climbed 3.3% after the biopharmaceutical firm’s fourth-quarter results surpassed expectations on both the top and bottom lines.
Kraft Heinz (NASDAQ:KHC) stock fell 3.3% after the packaged foods giant forecast annual profit below estimates, as it contended with sluggish demand for its higher-priced products.
(Peter Nurse, Ambar Warrick contributed to this article.)