Stocks Retreat After Inflation Data

All three indexes were on pace to post losses for the week.

Markets have traded choppily this week, as investors have digested shifting expectations about the prospective pace of central banks’ monetary tightening. Data on Thursday showed that inflation hit 7.5% in January, a four-decade high. A Federal Reserve official said the central bank might have to move more drastically to curtail consumer prices, spooking investors.

Those events injected fresh volatility into a stock market that is still on fragile footing. They also sent the yield on the benchmark 10-year Treasury note above 2% for the first time since mid-2019. The yield, which settled Thursday at 2.028%, recently traded at 1.987%. Yields and bond prices move inversely.

“The move is coming as the number of expected rate hikes this year rises. We’re in a process where the Fed is catching up to the market,” said

Sebastien Galy,

a macro strategist at

Nordea Asset Management.

Before Thursday’s downturn, the U.S. stock market seemed to show signs of stabilizing. The S&P 500 had risen in seven out of the last nine sessions going into Thursday. But concerns that the Fed may more aggressively hike interest rates this year frazzled investors again.

Early Friday, it seemed that stocks might recover. All three major U.S. indexes opened higher. But stocks turned lower as the session continued. Only four sectors in the S&P 500—financials, energy, utilities and consumer staples—recently traded higher.

“Inflation is currently in the public eye. It has become a political question,” said

Florian Ielpo,

head of macro at Lombard Odier Investment Managers. “This is something that is concerning us, we have a rising risk of monetary policy mistakes. This is the number one risk we see in 2022.” 

In individual trading,

Zillow

rose 17% after it reported a jump in revenue for its core unit, despite losing $881 million on its closed home-flipping business last year. Fintech company

Affirm

tumbled 16% after its sales forecast came in below Wall Street’s expectations. It plunged 21% Thursday.

Apollo Global Management

dropped 3.2% Friday after it reported a lower profit. The Wall Street Journal reported that the private-equity firm was nearing a deal to buy

Worldline’s

point-of-sale terminal business.