Wall Street Struggles as Inflation Print Dampens Rate Cut Hopes
Wall Street’s main indexes were uncertain on Thursday as the latest inflation data dampened hopes of early rate cuts. However, U.S. regulatory approval for exchange-traded funds (ETFs) tracking spot bitcoin boosted crypto stocks.
The benchmark S&P 500 briefly exceeded its record closing high from January 2022 before erasing the opening gains. The index has rebounded by almost 17% since October and gained momentum in December when the Federal Reserve hinted at reining in inflation and rate cuts becoming a possibility.
A report from the U.S. Labor Department revealed that consumer prices rose more than expected in December, primarily due to an upward trend in rents. This unexpected increase has prompted investors to reassess how many rate cuts the Fed will be able to implement this year.
Unemployment Benefits and Rate Cut Implications
A separate report showed that the number of Americans filing for unemployment benefits stood at 202,000, slightly lower than expectations. Following this data release, futures contracts that settle to the Fed’s target for overnight lending rates between banks fell. Market participants now imply a 60% chance of a rate cut in March, compared to the 70% chance prior to the data release.
Microsoft Surpasses Apple as Most Valuable Company
Microsoft overtook Apple as the world’s most valuable company after Apple experienced its worst start in years due to concerns over falling demand. Microsoft’s shares rose by 0.7%, while Apple’s shares declined by 0.9%.
Crypto Stocks Rise on ETF Approval
Crypto stocks such as Coinbase, Bitfarms, and Riot Platforms saw gains ranging from 5% to 11% after the U.S. securities regulator approved the first U.S.-listed ETFs to track spot bitcoin.
Stock Market Performance
As of 9:47 a.m. ET, the Dow Jones Industrial Average was down 0.07%, the S&P 500 was up 0.04%, and the Nasdaq Composite was up 0.20%. Citigroup declined by 2.7% following a filing revealing significant charges and reserves that will impact its fourth-quarter earnings, to be reported on Friday.
JPMorgan Chase, Bank of America, and Wells Fargo are also set to report on Friday. Lyft lost 3% after Goldman Sachs downgraded its stock to “neutral” from “buy”. Netflix, on the other hand, rose by 2.0% due to reports of its ad-supported tier reaching over 23 million active users per month globally.
Hot Take: Mixed Sentiments on Wall Street as Inflation Data Impacts Rate Cut Expectations
The latest inflation data has caused mixed sentiments on Wall Street, with hopes of early rate cuts dampened. The hotter-than-expected inflation number means investors need to reconsider how many rate cuts the Fed will be able to implement in 2024. Meanwhile, U.S. regulatory approval for ETFs tracking spot bitcoin has provided a boost to crypto stocks. The market remains uncertain as investors analyze unemployment benefit numbers and implications for rate cuts. Additionally, Microsoft surpassed Apple as the most valuable company globally, while Citigroup faced declines due to significant charges and reserves impacting its earnings. Overall, the stock market performance is a mix of gains and losses among various companies.
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