Market Snapshot: Dow falls 400 points after Fed’s favorite inflation gauge runs hotter than expected

by | Feb 24, 2023 | Stock Market

U.S. stocks fell Friday morning, after the Federal Reserve’s preferred inflation measure came in with a hotter-than-expected January reading.What’s happening
The Dow Jones Industrial Average
dropped 400 points, or 1.2%, to 32,749.

The S&P 500
was down 57 points, or 1.4%, to 3,953.

The Nasdaq Composite
dropped 228 points, or 2%, to 11,361.

Major indexes were on track for weekly losses.

What’s driving markets The personal consumption expenditure, or PCE, price index showed the cost of U.S. goods and services jumped 0.6% in January, its biggest rise since last summer and another sign that stubbornly high inflation is taking its time to return to low prepandemic levels. The annual increase in prices rose to 5.4% from 5.3% in December — the first uptick in seven months. The PCE index touched a 40-year high of 7% last June. The more closely followed core index, which is the Fed’s preferred inflation measure, also rose 0.6% last month. Analysts has forecast a 0.5% gain. The increase in the core rate of inflation in the past 12 months moved up to 4.7% from 4.6.%. Meanwhile, an index of consumer sentiment rose in early February to a 13-month high of 67. The final reading in February was up from a preliminary 66.4 and from 64.9 in January, the University of Michigan said.  Such data was seen cementing expectations the Federal Reserve will continue lifting its key interest rate above 5% in its effort to bring down inflation. “Reaccelerating price pressures coupled with a still-strong labor market that is restoring incomes and is supporting demand will keep the Fed on track to hike rates further over coming meetings, to a peak rate that could be higher than officials expected in December,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, in a note. “This morning’s data suggest the economy is very resilient and might prompt more bets that the Fed will need to take rates closer to 6.00%,” Edward Moya, analyst at Oanda, said in a note.

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