Stocks fall with bonds as CPI curbs bets on Fed pivot: Markets retreat | Mint – Mint

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(Bloomberg) — Stock futures joined losses on bonds as higher-than-expected inflation data reinforced speculation that the Federal Reserve would be in no rush to cut interest rates.

Stocks were poised to extend their April losses, with S&P 500 contracts falling more than 1% after the consumer price index underscored the rocky path policymakers face to bring inflation back to the 2% target. 10-year Treasury yields approached 4.5%, hitting a new high for 2024. The Fed’s swaps only factored in 50 basis points of easing in 2024, equivalent to two rate cuts. The dollar rose against all its developed country counterparts.

A measure of core inflation in the United States exceeded forecasts in March for the third month. The consumer price index, which excludes food and energy costs, rose 0.4% from February. Compared to last year, it increased by 3.8%, stable compared to the previous month.

Wall Street Reaction to CPI Data:

You can say goodbye to lower interest rates in June. There is no improvement here, we are going in the wrong direction.

In recent months, it has become clear that the path to the Fed’s 2% inflation target would be fraught with challenges. It’s often said that the Fed goes up the escalator and down the elevator when setting rates, but for the downward trajectory of this cycle, it looks like it will opt for the stairs.

The US economy is moving forward at a brisk pace and a rate cut in June is looking less and less likely – July or September are now the way to go. The Fed has its work cut out for it, and while other central banks have been waiting for the Fed to act, they now face a conundrum.

The rates market must seriously consider the likelihood of a longer hike, at least through the summer and potentially until the end of the year. This figure did not eclipse the Fed’s confidence, but it did cast a shadow over it.

This is the third positive result in a row and means that the stalled disinflationary narrative can no longer be called an incident. In fact, even if inflation were to cool next month to a more comfortable level, the Fed is likely being cautious enough today to mean that a July rate cut could also be overkill.

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