The stock market experienced a significant drop on Tuesday, with the Dow Jones Industrial Average losing 516 points, marking its biggest decline since March 2023. The S&P 500 and the Nasdaq Composite also slid by 1.4% and 1.7% respectively. The cause of this downturn can be attributed to the release of hotter-than-expected inflation data for January, which led to a spike in Treasury yields, raising concerns about the Federal Reserve’s ability to implement multiple rate cuts throughout the year.
The consumer price index (CPI) for January showed a 0.3% increase from December and a 3.1% rise on an annual basis, surpassing the 0.2% month-over-month and 2.9% year-over-year expectations set by economists. Core prices, excluding volatile food and energy components, also rose by 0.4% month over month and 3.9% from a year ago, exceeding the anticipated 0.3% and 3.7% increases, respectively.
Art Hogan, the chief market strategist at B. Riley Financial, commented on the situation, stating that the CPI data could serve as a reason to reduce the market’s recent high levels. He emphasized that the report indicated a slightly higher inflation rate than expected, signaling a non-linear downward trajectory for the market.
Following the release of the CPI data, the 2-year Treasury yield surged above 4.6%, and the 10-year yield exceeded 4.27%. Consequently, tech giants such as Microsoft and Amazon, which had previously driven the market to record highs as interest rates declined, experienced significant losses. Microsoft and Amazon both saw a 1.4% decline in their stock prices.
Amidst the market sell-off, certain companies also faced individual challenges. JetBlue Airways soared by 12% following activist investor Carl Icahn’s announcement of a nearly 10% stake in the airline. Conversely, toymaker Hasbro witnessed a 6% decrease after falling short of analyst expectations for the fourth quarter. Additionally, Avis Budget Group’s shares plummeted by 20% due to disappointing fourth-quarter revenue.
In the cryptocurrency market, Bitcoin experienced a 3% decline to $48,543.35 following the release of the CPI report. This downward trend also impacted related stocks, with the crypto exchange Coinbase and bitcoin proxy Microstrategy both suffering losses of 5% and 4% respectively.
