S&P 500 Wobbles as Rate Cut Hopes Fade Amid Inflation Surge and Geopolitical Tensions

📝 SUMMARY: The financial markets have been roiled by a confluence of rising core consumer price index (CPI) readings and escalating geopolitical tensions, leading to a significant downturn in both the S&P 500 ($.INX) and bond markets. As the core CPI marked a 0.4% increase from February and a 3.8% rise year-over-year, maintaining its upward trajectory for the third consecutive month, investors are growing increasingly wary of the Federal Reserve's next moves. This inflationary pressure has prompted a hawkish adjustment in market expectations, with Treasury yields spiking and equity markets sliding.

The S&P 500 fell by about 1% as investors digested the implications of the robust CPI data which surpassed forecasts yet again. This downturn is part of a broader decline in April, exacerbated by the revised outlook on Federal interest rates. The Treasury's 10-year yields have surged past 4.5%, and market bets are now predominantly leaning towards only two potential rate cuts in 2024, a stark contrast to the more optimistic expectations earlier this year.

Adding to the market's woes, geopolitical risks have resurfaced notably due to potential conflicts involving Iran, which has also influenced the oil markets with Brent crude prices breaching the $90 mark. These developments have cast a shadow over the anticipated rate cuts, with the Fed possibly maintaining higher rates longer than previously expected. This sentiment was echoed by various financial experts who suggested that the path to lower rates would be more gradual, resembling a staircase descent rather than an abrupt drop.

The financial conditions, though relatively loose, have not swayed the Fed's stance significantly, as indicated by recent remarks from Fed Chair Jerome Powell and other policymakers. They suggest a cautious approach to easing, with a keen focus on sustainable economic indicators and inflation targets. Market participants are now bracing for a slower easing cycle, potentially adjusting their strategies in anticipation of prolonged higher rates, which could reshape investment landscapes through 2024.

🔍 SOURCE: https://www.bloomberg.com/news/articles/2024-04-09/stock-market-today-dow-s-p-live-updates?srnd=homepage-americas