CPI Report Freezes S&P 500 Record Run

The market awoke to a nor'easter snow storm on the east coast, but January CPI numbers froze markets faster than the snow could fall. The indexes fell, and stocks traded lower.

CPI for the first month of 2024 came in at 3.1%, while investors hoped for 2.9%, further on the downtrend to the Federal reserves target 2%. Tuesday morning, the long road to rate cuts grew longer, already pot marked recently by FedSpeak that pushed expectations past March.

Currently, markets are pricing in a 78% probability that the Fed will deliver at least a quarter-point rate cut in June, according to the CME FedWatch Tool. They also see an 87.2% chance of at least three rate cuts by December.

Elsewhere, there was a reminder from the U.K. of further inflationary pressures. Britain's Office for National Statistics said that average weekly wages, including bonuses, rose by more than expected toward the end of last year. The U.K. 2-year government bond yield climbed 10.1 basis points to 4.650%.

"The 'January effect' where companies tend to raise prices at the turn of the year was likely one driver of the stronger print, with companies continuing to push price [gains] after another year of strong inflation. Companies that expected prices to rise at a more muted pace in 2023 may have needed to 'catch up' and were able to do so given the continued strong pricing environment," said Josh Jamner, investment strategy analyst at ClearBridge Investments.