Nasdaq 100: Treasury Yields Soar, Pressuring US Stocks—Tesla and Gilead Defy the Trend

Wall Street Drops as Hot Inflation Data Casts Doubt on Rate Cuts

Wall Street’s main indexes are trading mixed-to-lower at the mid-session on Wednesday after consumer prices rose more than expected in January, raising concerns that the Federal Reserve will hold off on cutting interest rates. Treasury yields surged following the data release, putting pressure on equities, particularly rate-sensitive sectors. However, strong earnings from CVS Health helped limit broader losses.

At 17:52 GMT, the Dow Jones Industrial Average is trading 44,420.76, down 172.89 or -0.39%. The S&P 500 Index is at 6,054.76, down 13.74 or -0.23% and the Nasdaq is trading 19647.82, up 3.96 or +0.02%.

How Did Inflation Data Impact the Market?

The consumer price index (CPI) rose 0.5% in January, exceeding economist expectations of 0.3%. Year-over-year inflation now stands at 3%, while core CPI, which excludes food and energy, rose 3.3%. This report complicates the Fed’s outlook, as officials have stressed they need “greater confidence” that inflation is cooling before considering rate cuts.

Following the data release, traders reduced their expectations for multiple rate cuts in 2024. Market pricing now suggests just one 25-basis-point cut this year, compared to previous estimates of two. The 10-year Treasury yield spiked to 4.65%, its highest level in over two weeks, reflecting fears that rates will remain higher for longer.

Which Sectors Are Feeling the Pressure?

All 11 S&P 500 sectors were in the red, with real estate leading losses, down 1.4%. The sector, which is highly sensitive to interest rates, was hit hard as Treasury yields climbed. Utilities also declined 0.7%, while energy stocks dropped 1.5% as crude oil prices fell.

Financials and consumer discretionary stocks also struggled, with banks facing the prospect of a prolonged period of high interest rates that could slow lending demand. Growth stocks, particularly in the tech sector, also saw weakness, as the cost of capital remains elevated.

Which Stocks Are Standing Out?

Most megacap tech stocks declined, with Nvidia and Amazon falling over 1%. Nasdaq, however, rebounded 2.7% after a five-day losing streak, bucking the broader market trend. Apple and Intel also managed modest gains, helping limit losses in the Nasdaq Composite.

CVS Health surged 13.6% after posting stronger-than-expected Q4 earnings, while Gilead Sciences jumped 7.7% following a bullish earnings forecast for 2025. Lyft shares tumbled 6.6% after issuing a disappointing outlook on gross bookings.

What’s Next for the Market?

The latest CPI data reinforces the Fed’s cautious stance, making it less likely that rate cuts will come in the first half of the year. Chair Jerome Powell reiterated in his Congressional testimony that while inflation has improved, the Fed is “not quite there yet” in terms of hitting its 2% target.

With rate-cut expectations fading, traders will be closely watching upcoming economic reports, particularly Friday’s producer price index (PPI) and next week’s retail sales data. If inflation pressures persist, markets could face further downside as investors reassess their rate outlook.

For now, Wall Street is bracing for choppier trading as higher-for-longer interest rates take hold.

More Information in our Economic Calendar.