The S&P 500 and S&P/TSX Composite Index ended lower on Wednesday after a hotter-than-expected U.S. inflation reading added to worries that the Federal Reserve would not cut interest rates anytime soon.
U.S. consumer prices increased in January by the most in nearly a year and a half, reinforcing the Fed’s message that it was in no rush to resume cutting rates.
The surge in prices offered a cautionary note to President Donald Trump’s push for tariffs on imported goods, which economists have panned as inflationary.
Interest rate futures now suggest traders see about a 70% chance the Fed will reduce rates by another 25 basis points by the end of 2025, down from about an 80% chance on Tuesday, according to CME Fedwatch.
“Inflation is not behaving in a way that suggests the Fed will cut rates and that is incrementally bad news for the markets for now,” said Angelo Kourkafas, investment strategist at Edward Jones Investments.
Fed Chair Jerome Powell also began his second day of testimony before Congress on Wednesday. On Tuesday, he reiterated to the Senate Banking Committee that the U.S. central bank was in no rush to cut rates again.
January’s reading is the last inflation reading before any direct impact from Trump’s tariff measures, which went into effect this month.
Trump’s trade advisers are finalizing plans for the reciprocal tariffs on every country that charges duties on U.S. imports.
The Cboe Volatility Index, known as Wall Street’s “fear gauge,” jumped to its highest in a week.
Treasury yields shot up after the inflation data, with the one on the 10-year note hitting its highest in over two weeks.
In Toronto, a drop in oil prices weighed on energy shares.
The S&P/TSX composite index ended down 68.72 points, or 0.3%, at 25,563.11, its second straight day of declines.
The energy sector fell 2.2% as the price of oil settled 2.7% lower at $71.37 a barrel.
U.S. President Donald Trump took the first big step toward diplomacy over the war in Ukraine he has promised to end, a war that has supported oil prices on concerns about global supplies. Trump said Wednesday that he and Russian leader Vladimir Putin had agreed to begin negotiations on ending the war following a sudden prisoner swap.
Consumer discretionary stocks in Toronto lost 1.1%, while real estate ended 1% lower as bond yields climbed. The Canadian 10-year yield was up 9.4 basis points at 3.192%.
The materials group was a bright spot, rising 1.2%, as gold and copper prices rose. Barrick Gold Corp shares added 6.3% after the mining company announced a share buyback program and beat analysts’ estimates for fourth-quarter profit.
Shares of BlackBerry Ltd jumped 10.2%, touching the highest since August 2022.
The S&P 500 declined 0.27% to end the session at 6,051.97 points. Nvidia and Amazon dipped more than 1%, with the two AI computing heavyweights weighing on the S&P 500 .
The Nasdaq gained 0.03% to 19,649.95 points, while the Dow Jones Industrial Average declined 0.50% to 44,368.56 points.
Of the 11 S&P 500 sector indexes, nine declined, led lower by energy, down 2.69%, followed by a 0.91% loss in real estate.
CVS Health surged 15% after the healthcare conglomerate beat fourth-quarter profit estimates, hinting at improved performance under new CEO David Joyner.
Gilead Sciences jumped 7.5% after the biotech company forecast 2025 earnings above analyst estimates.
Lyft dropped 8% after the ride-hailing company forecast current-quarter gross bookings below estimates.
In extended trade, Robinhood Markets surged 5% after the stock trading platform reported quarterly revenue above analysts’ expectations, fueled by frenetic trading activity following Trump’s presidential election victory in November.
In Wednesday’s session, declining stocks outnumbered rising ones within the S&P 500 by a 2.2-to-one ratio. The S&P 500 posted 24 new highs and 24 new lows; the Nasdaq recorded 75 new highs and 210 new lows. Volume on U.S. exchanges was relatively light, with 14.8 billion shares traded, compared to an average of 14.9 billion shares over the previous 20 sessions.
Reuters, Globe staff