Inflation Data Triggers Bond Yield Surge, Shifting Fed Rate Cut Expectations
Bond yields rose and stock futures fluctuated following higher-than-expected inflation data in January, suggesting the Federal Reserve might delay interest rate cuts. The Producer Price Index’s increase, driven by rising service costs, adds to inflation concerns, reinforcing expectations that the Fed will wait for more significant inflation control before lowering rates. Amid these developments, Treasury two-year yields surged to 4.67%, and the dollar strengthened, while market bets on Fed rate cuts this year have been adjusted from 150 to 85 basis points.
In other economic news, U.S. housing starts declined, pointing to a slow housing market recovery as buyers anticipate further mortgage rate drops. Meanwhile, corporate updates include Applied Materials’ ($AMAT) optimistic revenue forecast, OpenAI’s efforts to secure U.S. approval for AI chip production, Coinbase Global ($COIN) reporting its first profit in two years, DoorDash ($DASH) exceeding delivery order estimates, and DraftKings’ ($DKNG) acquisition of Jackpocket. Additionally, Eli Lilly’s ($LLY) market value surge and Novartis’ plans to enter the obesity treatment market were highlighted.
In market movements, S&P 500 futures remained stable, Nasdaq 100 futures saw a slight increase, and Dow Jones Industrial Average futures dipped. The euro, British pound, and Japanese yen all weakened against the dollar. Bitcoin and Ether experienced gains, while the yield on 10-year Treasuries climbed to 4.30%. Oil prices increased, but gold slightly dropped in value.
