Roses are red, violets are blue, the Dow dropped on inflation’s cue. Prices stayed high, the rate cut day isn’t even nigh.
The Dow Jones Industrial Average DJI slipped to its worst day since March 2023 after inflation knocked investors’ conviction of an early interest rate cut. The 30-stock blue-chip index wiped out 524 points, or 1.4%. The Nasdaq Composite erased 1.8% and the S&P 500 tumbled 1.4% on the day.
Inflation in the US picked up to 3.1% for January, coming in above the consensus for a 2.9% clip. While consumer prices maintained their downward trajectory, sliding from 3.4% in December, overshooting expectations triggered a panic reaction about how soon the Federal Reserve will start lowering interest rates.
It became clear that the next time the central bank meets for a rate decision, there won’t be any cutting going on. Now, the prospects of a cut in May are less certain after the slight miss. Even if the timeline is pushed back, there will still be time for the Fed’s three rate cuts projected this year. But will investors continue fighting the Fed and expect more than that?