Wednesday’s Market Decline Attributed to New Inflation Data
Stocks are in decline this week after the Consumer Price Index revealed increasing inflation.
Quick overview
- Stocks fell on Wednesday, with the Dow down 0.3%, as inflation data aligned with expectations.
- The Consumer Price Index rose to 2.7% in December, exceeding the Federal Reserve's 2% target, raising investor concerns.
- Bank earnings this week have been disappointing, with Wells Fargo reporting weaker-than-expected results and JPMorgan Chase losing 4% in stock value.
- President Trump's potential freeze on credit card rates is adding pressure to financial markets and could lead to increased volatility.
Stocks dipped on Wednesday after the Consumer Price Index showed that inflation was rising but in line with expectations, causing the Dow to lose 0.3%.
Nasdaq fell 0.6% and the S&P 500 lost 0.4% after CPI data revealed rising inflation. In December, the CPI climbed 2.7%, which is higher than the Federal Reserve’s target of 2% for inflation. Investors are likely to panic over the next few days as the effects of this report trickle down through the stock market.
January Rally May Be Over
Stocks are retreating this week after finishing low on Tuesday and then starting Wednesday off with further decline. The late December rally that the stock market experienced carried over into early January but now appears to be finished.
This week of important earnings releases for banks has not been as bullish as expected. Before any of the banks could release their quarterly earnings, President Donald Trump announced a potential freeze on credit card rates. That prompted a stock decline across the board for leading bank stocks, and many of them have fallen even further as the week progressed.
Wells Fargo dropped 1% after the company reported weaker earnings than expected. Bank of America added 1% on Tuesday after their revenue figures came in better than anticipated, but the BAC stock has declined for the past five days and opened Wednesday’s trading session with another 1% dip.
Later this week, Citigroup will be releasing quarterly earnings and adding their numbers to the pile. JPMorgan Chase showed disappointing earnings and lost 4% of their stock value as a result. Goldman Sachs is down 1.20% as well, rounding out a list of banks that have underperformed and are being hurt by Trump’s plans to give consumers a break.
Trump may be causing a headache for financial markets right now and particularly for financial institutions as he is going after Jerome Powell of the Federal Reserve. This has put pressure on the Fed, and analysts are worried that the criminal charges being levied against Powell will result in less freedom for the Fed and more volatility in the stock market.
If investors believe that the financial sector is being manipulated by the government, that could be devastating for stocks. It would mean that many investors would withdraw out of fear or would at the very least have to rethink their investing strategies with the new factors that would be introduced into the mix.
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