Data from the Bureau of Labor Statistics released Wednesday shows the Consumer Price Index (CPI) increased 3% over the prior year in January, a rise from December’s 2.9% annual gain in prices. The hotter-than-expected January inflation data initially impacted stocks (^GSPC, ^IXIC, ^DJI) negatively, but a rebound was seen later in the day. Piper Sandler’s chief investment strategist Michael Kantrowitz joins Market Domination to discuss the data, noting that bond yields (^TYX, ^TNX, ^FVX) shot up following the data release. “The market is just super sensitive to changes in interest rates at these higher levels,” he explains, emphasizing that rate-sensitive stocks and sectors, such as small caps and homebuilders, have been hit particularly hard. Kantrowitz discusses his outlook for the Federal Reserve’s interest rate decisions. “The Fed [interest rate] cutting story was mostly about unemployment moving higher, and I would say we’re starting to see some green shoots of the employment data that has softened; we’ve seen an improvement in some of that data,” he says. On the surge in home equity loans, he notes, “It’s a reflection or a byproduct of the frozen housing environment,” indicating that it may not be a major concern. To watch more expert insights and analysis on the latest market action, check out more Market Domination here.
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