ASX set to inch up, Wall Street falls on inflation shock; Oil falls on Putin talks

Some investors were betting on the Fed not cutting rates at all in 2025, even before Wednesday’s report on the consumer price index, or CPI.

“The hotter than expected CPI confirms investors’ anxiety regarding too-hot inflation that will keep the Fed on the sidelines,” said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute.

And January’s reading doesn’t account for any of the tariffs that Trump has recently announced, with possibly more on the way, which economists expect will raise prices for imports further. Tariffs “will make their impact felt later in the year,” Samana said.

Following January’s discouraging inflation data, traders are betting on a 29 per cent chance the Fed will not cut rates at all this year, according to data from CME Group. That’s up from a less than 20 per cent chance seen the day before.

Such expectations sent the yield on the 10-year Treasury up to 4.62 per cent from 4.54 per cent late Tuesday, which is a notable move for the bond market.

When a 10-year Treasury, which is seen as one of the safest investments possible, is paying that much in interest, investors are less likely to pay high prices for shares, which carry a higher risk of seeing their prices go to zero. That puts downward pressure on US share prices that critics say already look too expensive after running to repeated records last year, with the latest for the S&P 500 coming last month.

One of the few ways companies have to counteract such downward pressure on their stock prices is to deliver stronger profits.

Gilead Sciences did just that, and its stock rose 7.5 per cent after the pharmaceutical company topped profit expectations for the latest quarter. It credited strength for its HIV products, among other things.

CVS Health jumped 14.9 per cent after easily topping Wall Street’s revenue and profit expectations for the latest quarter.

But topping profit forecasts isn’t always enough. Ride-hailing app Lyft fell 7.9 per cent despite reporting stronger earnings than expected. Lyft’s revenue for the final three months of 2024 fell just short of analysts’ forecasts.

Homebuilders and other companies that can feel pain from mortgage rates staying higher amid a Fed on hold also weighed on the market. Home Depot fell 2.2 per cent, Builders FirstSource sank 3.5 per cent and Lennar dropped 2.7 per cent.

Exxon Mobil sank 3 per cent as oil-and-gas companies fell broadly.

Frontier Group Holdings, the parent company of Frontier Airlines, lost 4.9 per cent after Spirit Airlines rejected a third takeover bid from the budget rival. Spirit said that it would focus on its own plan to emerge from the protection of a US bankruptcy court and stabilise its finances.

All told, the S&P 500 fell 16.53 points to 6,051.97. The Dow Jones dropped 225.09 to 44,368.56, and the Nasdaq composite added 6.09 to 19,649.95.

In sharemarkets abroad, indexes were mostly higher across much of Europe and Asia.

AP, Bloomberg

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