Wall Street opens lower on worries about inflation, rates
The S&P 500 was 1.1% lower in early trading after a report showed inflation at the wholesale level slowed by less last month than economists forecast. It echoed a report on prices at the consumer level from earlier this week that showed inflation may not be cooling as quickly and as smoothly as hoped.
Such fears have been most clear in the bond market, where yields have leaped in recent weeks as traders up their bets for how high the Fed will take interest rates this year. Thursday's report showed that prices at the wholesale level were 6% higher last month than a year earlier. While that was a slowdown from December's 6.5% inflation rate, it was worse than the 5.4% that economists expected to see. Perhaps more alarming was that inflation accelerated in January on a month-to-month basis even after stripping out prices for food, energy and other layers.
Other reports, meanwhile, showed an index of manufacturing activity in the mid-Atlantic region plunged this month, while homebuilders broke ground on fewer homes last month than economists expected. The strong recent reports on inflation and the job market have forced Wall Street to align its forecasts for rates closer to the Fed's. Earlier this year, there was a wide disconnect between them. Investors were betting the Fed wouldn't go as high as it was saying, while also holding out significant hopes for a cut to rates in the latter part of the year.
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