Wall Street took a nosedive Tuesday following the before-the-bell release of hotter-than-expected January consumer inflation data. In response, bonds sold off, pushing the 10-year Treasury yield above 4.30% and equity prices sharply lower. The Dow , the S & P 500 and the Nasdaq were all down more than 1.5%, as the odds of a Federal Reserve interest rate cut in May dropped to 33% from prior levels above 61%, according to the CME FedWatch Tool. The headline consumer price index (CPI) number was up 0.3% in January versus 0.2% expected, and up 3.1% year over year versus up 2.9% expected. The core rate , excluding food and gas prices, was up 0.4% month over month versus up 0.3% expected, and up 3.9% year over year versus up 3.7% expected. Jim Cramer has been saying for a while now that the economy remains too strong for a rate cut anytime soon. Tuesday’s CPI print interrupted a run of numbers pointing to cooling inflation trends. It remains to be seen whether this is a one-month blip or not. But in an economy as resilient as we’ve seen in the face of 11 rate hikes starting in March 2022, the risk of rekindling inflation is always a concern. Shelter costs, which account for roughly one-third of headline CPI and even more at the core level, continued to stand out as a major area of stickiness. Under services, the shelter component was an upside surprise, increasing 0.6% monthly and 6% year over year. Other sources of upward pressure on core CPI came from medical care , up 0.7% month over month and up 0.6% year over year, and transportation , up 1% monthly and up 9.5% annually. Against that, still focusing on the core index, commodities with roughly a 19% weighting, declined 0.3% on both a monthly and year-over-year basis, new vehicle prices were unchanged monthly but up 0.7% annually; used cars and trucks were down 3.4% monthly and down 3.5% year-over-year; apparel was down 0.7% monthly and ticking up only 0.1% annually; and medical care commodities were down 0.6%…
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