Markets took a sharp downward turn on Wall Street after U.S. government data Wednesday showed that inflation accelerated last month.
Futures for the S&P 500, Dow Jones Industrial Average and Nasdaq all fell at least 1% less than an hour before the opening bell.
The surprisingly hot inflation number deflates the odds even further of a rate cut any time soon from the Federal Reserve. Elevated interest rates can hurt stock prices as investors push their money into safer havens like government bonds.
Yields on the 2-year Treasury jumped from 4.28% to 4.37% immediately after the the inflation report was released. The 10-year Treasury jumped similarly, from 4.53% to 4.63%.
The consumer price index increased 3% in January from a year ago as the cost of groceries, gas, and used cars rose, Wednesday’s report from the Labor Department showed. That's up from 2.9% the previous month and from a 3 1/2 year low of 2.4% in September.
The figures underscore the stickiness of inflation, which created a major political problem for former President Joe Biden. President Donald Trump pledged to reduce prices in last year’s campaign, though most economists worry that his many proposed tariffs could at least temporarily increase costs.
In equities trading, struggling pharmacy chain CVS Health soared 9.3% after it beat Wall Street's modest sales and profit expectations. CVS's profit fell well below the prior-year period, which the company partly blamed on increased medical costs in its insurance division.
Ride-hailing app Lyft tumbled to a 14% loss in premarket trading, despite reporting stronger profits that Wall Street expected. Lyft missed revenue forecasts as higher prices weighed on bookings, the company said.
DoorDash, the food delivery app, gained 4.2% after it fell a hair short of profit expectations but topped analysts' sales targets.
Shares of Frontier Group Holdings, the parent company of Frontier Airlines, fell 4.4% in premarket after Spirit Airlines rejected a third takeover bid from the budget rival. Spirit said that it would focus on its own plan to emerge from bankruptcy and stabilize its finances.
All around the world, uncertainty about how the Trump administration's policies — particularly immigration and tariffs — has pushed Fed officials into a more cautious wait-and-see mode with regard to monetary policy.
Most of Wall Street agrees that substantial and sustained tariffs would push up prices for U.S. households and ultimately lead to big pain for financial markets around the world.
But Trump has also shown he can be quick to pull back on such threats. That’s what he did earlier with 25% tariffs he had announced for all imports from Canada and Mexico, suggesting tariffs may be merely a negotiating chip rather than a true long-term policy. That in turn has much of Wall Street hoping the worst-case scenario may not happen.
Trump's latest announcement included 25% tariffs on all foreign steel and aluminum coming into the U.S.
South Korea and to a lesser extent Japan export steel to the U.S., but the impact on their economies might not be that big since both nations export more in other goods to the U.S.
Last month, Trump decided to impose 10% duties on all Chinese imports.
Japan's benchmark Nikkei 225 rose 0.4% to finish at 38,963.70. Australia's S&P/ASX 200 gained 0.6% to 8,535.30. South Korea's Kospi edged up 0.4% to 2,548.39.
Hong Kong's Hang Seng jumped 2.6% to 21,857.92, as excitement over DeepSeek continued, although market watchers are wondering when the rally might peak. The Shanghai Composite edged up 0.9% to 3,346.39.
In Europe at midday, Germany’s DAX added 0.3% and Britain’s FTSE 100 edged up 0.1%. France’s CAC 40 was essentially unchanged.
In energy trading, benchmark U.S. crude fell 81 cents to $72.51 a barrel. Brent crude, the international standard, declined 69 cents to $76.31 a barrel.
In currency trading, the U.S. dollar edged up to 153.54 Japanese yen from 152.43 yen. The euro cost $1.0373, up from $1.0363.
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