Is CPI a warning sign for bull market trouble? 13/02/2025

HOT stories for today

US market wrap:
 

• The S&P 500 slid and interest rates surged Wednesday after January’s consumer price data came in higher than anticipated, sparking concerns that inflation could regain momentum. The broad-market index dipped 0.27%, while the Dow Jones Industrial Average dropped 0.5%, to 44,368.56. The Nasdaq Composite managed a slight 0.03% gain. The 10-year Treasury yield, a key benchmark for mortgages, auto loans, and credit cards, spiked to a session high of 4.66%.
• Shares of major tech companies, including Amazon and Alphabet, declined, while consumer and banking stocks—vulnerable to reduced spending and economic slowdown—also pulled back. The hotter-than-expected inflation report dims prospects for the Federal Reserve resuming rate cuts soon and even raises speculation about a potential hike instead. Earlier in the day, before the CPI release, President Donald Trump reiterated his call for lower interest rates. Among S&P 500 sectors, only communication services (+0.11%) finished in positive territory, while energy (-2.41%) was the biggest laggard.

Is CPI a Warning Sign for Bull Market Trouble?

• Fresh inflation concerns shook markets Wednesday, casting doubt on the stock rally and the Fed’s ability to cut rates. January’s CPI showed stronger-than-expected price pressures, moving inflation further from the Fed’s 2% target. Traders have now lowered expectations for rate cuts, with some speculating a hike could be possible. Markets had been stable in recent weeks, supported by bond market calm and President Donald Trump’s tariff and immigration policies. However, a sharp rise in the 10-year Treasury yield to 4.64% now threatens that stability, increasing borrowing costs and raising concerns that yields could surpass 5% this year.
• Historical data suggests markets weaken in the first quarter after an election year, and inflation expectations are rising. The University of Michigan’s consumer sentiment survey reflected growing concerns, while analysts warn that further tariffs could add pressure. Trump continues to call for lower interest rates, but market forces ultimately dictate bond yields. If they keep climbing, stocks could face more turbulence ahead.

 
Stocks on the move:       

• Reddit (RDDT): The social media platform dropped 17% after reporting lower-than-expected user numbers. Daily active uniques averaged 101.7 million in the fourth quarter, falling short of Wall Street projections.
• The Trade Desk (TTD): Shares of the advertising technology firm plummeted 25% after posting $741 million in fourth-quarter revenue, missing the $759 million consensus estimate from analysts surveyed by LSEG.
• Robinhood (HOOD): The digital finance company soared 13% after delivering stronger-than-anticipated fourth-quarter revenue. Robinhood reported $1.01 billion for the period, surpassing the $944.6 million estimate from LSEG analysts.
• AppLovin (APP): The app technology stock surged 20% following better-than-expected fourth-quarter results and strong revenue guidance for the current quarter.
• Fastly (FSLY): The cloud services provider sank 16% after issuing weak full-year guidance, forecasting a loss between 9 cents and 15 cents per share.

 
Today’s action

• Asia-Pacific markets advanced on Thursday, diverging from Wall Street, which declined overnight after hotter-than-expected U.S. inflation data dampened hopes for Federal Reserve policy easing. Japan’s Nikkei 225 gained 1.48%, while the Topix rose 1.34%. South Korea’s Kospi climbed 0.96%, with the small-cap Kosdaq up 0.5%. Hong Kong’s Hang Seng Index increased 1.52%, while mainland China’s CSI 300 dipped 0.13%.
• In the U.S., S&P 500 futures edged up nearly 0.2% Wednesday night as traders assessed corporate earnings and awaited more inflation data. Nasdaq 100 futures rose 0.3%, while Dow Jones Industrial Average futures added 72 points, or nearly 0.2%. Investors will focus on Thursday’s producer price index, which tracks wholesale inflation, and the latest jobless claims data. Earnings season continues, with Airbnb, Coinbase, and Palo Alto Networks set to report after the closing bell. So far, over 69% of S&P 500 companies have reported, with nearly 77% exceeding Wall Street estimates, according to FactSet.

Wahtclist: DE, APP, RDDT, FSLY, BROS, HOOD, TTD, META, COIN

Bitcoin

• After sliding to just above $94,000 earlier Wednesday on hotter-than-expected U.S. inflation data, bitcoin (BTC) has rebounded, climbing to $97,500. The recent rally suggests short sellers, who have largely dominated since Trump’s inauguration, may be locking in profits.
• Other cryptocurrencies have also bounced, but bitcoin leads with a 1.4% gain over the past 24 hours, outperforming the broader CoinDesk 20 Index's 0.5% rise. Adding to the positive sentiment in both crypto and traditional markets is President Trump’s claim of a “highly productive” call with Russian President Putin about ending the war in Ukraine.
  Watchlist: Bitcoin: 89 000-108 000, Ethereum: 2200-3000, Solana: 180-276

Forex

• USD/JPY soared over 1% on Wednesday, breaking through the 153.00 and 154.00 resistance levels, driven by a spike in US Treasury yields following hotter-than-expected inflation data. The pair currently trades near 154.50 after clearing the 200-day Simple Moving Average (SMA) at 152.76. However, it faces resistance at 154.90, with bulls eyeing 155.26 and support at 153.00.
• Meanwhile, EUR/USD rose 0.2% but struggled to maintain upside momentum. The pair spent most of the session near intraday lows before rebounding slightly as markets absorbed the unexpected CPI jump. Investors now shift focus to Thursday’s US Producer Price Index (PPI) report, with European data taking a backseat for the week.
  Watchlist: EUR/USD: 1.0200-1.0550, USD/JPY: 153.6-158.80

Basic Materials

• Gold prices stabilized late Wednesday despite US CPI rising above 3% in January. Traders trimmed expectations for Fed rate cuts to just 30 basis points for 2025, while Fed Chair Jerome Powell reiterated the need for restrictive policy amid inflation concerns and escalating tariff threats from President Donald Trump. XAU/USD trades near $2,897, remaining flat.
• Meanwhile, West Texas Intermediate (WTI) crude edged lower to $71.10 in early Thursday trading. Oil prices dipped after Trump held calls with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy to discuss ending the war in Ukraine. Additionally, US crude stockpiles rose by 4.07 million barrels last week, according to the EIA, adding further pressure to WTI.
  Watchlist: GOLD 2600-2902, US Oil: 70.00-79.00

Key Economic Events Today:

EST time
08:30 am: USD PPI, Core PPI
08:30 am: USD Unemployment Claims
01:01 pm: USd 30-y Bond Auction

Earnings

BMO (Before the US Market opens)
SONY      CME Group IncSony Group Corp.
DE           Deere and Company
MCO        Moody’s Corp.
DUK         Duke Energy Corp.

AMC (After the US Market closes): AMAT, PANW, COIN, ABNB

The TEFS Analyst team wishes you a successful day!