Dow slumps as Treasury yields jump after hot inflation report cools rate-cut bets

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Dow slumps as Treasury yields jump after hot inflation report cools rate-cut bets
Credit: © Reuters.

Investing.com -- The Dow slumped on Tuesday as Treasury yields surged after a hotter-than-expected inflation report cooled expectations for a sooner and more aggressive Federal Reserve's rate cutting cycle. 

By 14:33 ET (19:33 GMT), the Dow futures fell 688 points, or 1.8%, the  S&P 500 futures contract fell 1.7%, and the Nasdaq 100 futures clumped 1.9%.

Inflation comes in hot to cool Fed rate cut optimism, pushing Treasury yields higher

Headline annual U.S. inflation slowed to 3.1% pace in January, from 3.4% a month earlier, but that was still above economists estimates of 2.9%.

Core inflation , which the Fed watches more closely as it strips out volatile items like food and fuel, remained at the same annual pace of 3.9% posted in December, but was expected to slow to a 3.7% pace.

Treasury yields jumped, with the 2-year Treasury yield rising 17 basis points to 4.637%, while the yield on the 10-year Treasury surging 14 basis points to 4.316%. 

The hotter inflation report was driven by the "lumpy shelter/rent component," RBC said, adding that  broader signs of reacceleration in inflation pressures" as well as a strong labor market "are reinforcing the risk that the Fed won't need (or be able to) pivot to interest rate cuts as quickly or aggressively as previously expected."

With a March rate cut all but priced out, investors cut their bets on a May rate cut to 31.6% from nearly 50% the prior day, according to Investing.com's Fed Rate Monitor Tool. 

Coca-Cola delivers earnings beat, but peak pricing power worries weigh; Biogen, Hasbro stumble on earning stage

Coca-Cola Co (NYSE: KO ) fell nearly 1% after better-than-expected fourth-quarter results and guidance was cast aside by worries about waning pricing power as top-line sales growth from a year earlier.

Biogen (NASDAQ: BIIB ) fell more than 7%  after the company reported lower-than-anticipated profit and revenue in its latest quarter, driven by weaker sales across multiple products including Vumerity, Spinraza amid competition and pricing pressures. 

Hasbro (NASDAQ: HAS ) also stumbled on the earnings stage, after its fourth-quarter results and guidance missed Wall Street estimates, sending its shares more than 3% lower.

The toy maker's performance was dragged by it entertainment segment, which came under pressure from industry strikes, and a losses owing to goodwill and intangible asset impairment charges.

Nvidia gets a boost ahead of quarterly earnings next week

NVIDIA Corporation (NASDAQ: NVDA ) sidestepped the heavy selling to trade just below the flatline after Mizuho upgraded its price target on the stock to $825 from $625, as the chipmaker will continue its market dominance amid rising AI demand. 

The bullish backing comes come just ahead of the fourth-quarter results due Feb. 21. 

Nvidia is up 231% over the past year, with market cap of about $1.79 trillion.  

(Scott Kanowsky, Oliver Gray contributed to this report.)

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