Wall Street opened lower on Wednesday with investors spooked once again after inflation data came in stronger than expected in January, fanning fears of faster US interest rate rises.
Both the S&P 500 and the Dow Jones Industrial Average were trading 0.5 per cent lower at 2,649.63 and 24,507 in early trade, while the Nasdaq Composite fell 0.3 per cent to 6,995.05.
The moves come after the latest inflation reading offered more evidence that price pressure is finally building following a long run of softness.
Markets have been rocked by bouts of volatile sell-offs over the past two weeks after a rapid increase in US wages stoked expectations of rate rises and sent bond prices tumbling.
Market watchers said the inflation report — which showed both core and headline inflation rising more than expected — could spur Fed officials to step up the pace of its interest rate tightening this year.
“In our view, market-pricing for Fed policy understates the solid macro backdrop, including a 17-year low unemployment rate, and the impact of fiscal stimulus, and we think there is scope for more rate hikes this year than the Fed’s current projection for three,” said Andrew Wilson, head of Goldman Sachs Asset Management for EMEA.
“That said, we think today’s data should viewed in conjunction with PCE inflation — the Fed’s preferred measure of prices — and wages, which were the culprit for the recent volatility spike, which will be released at the start of next month.”
Treasuries sold off after the inflation report. Yield on the 10-year note — which moves inversely to price — was up more than 4 basis points at 2.8821 per cent after having traded 2 basis points lower earlier in the day.
The dollar, as measured by the DXY index, firmed 0.2 per cent to 89.87.
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