As of the time of writing, all three major indexes fell, with the S&P 500 Index down 0.55%, Nasdaq down 0.37%, and Dow Jones down 0.74%.

Dow Jones dropped 361.23 points, a decrease of 0.81%, closing at 44,232.42 points; Nasdaq fell 216.81 points, down 1.10%, ending at 19,427.04 points; S&P 500 Index decreased by 53.86 points, down 0.89%, finishing at 6,014.64 points.

CPI in the USA for January was higher than expected, indicating increased inflationary pressure, prompting economists to downgrade expectations for the Federal Reserve's interest rate cuts.

The U.S. Bureau of Labor Statistics reported on Wednesday that the January Consumer Price Index (CPI) rose 0.5% month-on-month and 3.0% year-on-year. Economists surveyed by Dow Jones had expected a month-on-month growth of 0.3% and a year-on-year growth of 2.9%.

Excluding the more volatile food and energy prices, the core CPI for January increased by 0.4% month-on-month and 3.3% year-on-year, while economists' expectations were 0.3% and 3.1%.

The Producer Price Index (PPI) will be announced on Thursday.

Some economists emphasize that while certain categories may experience deflation, tariffs imposed by Trump could offset this situation.

Since Trump's election, economists have generally raised their forecasts for inflation, as they are concerned that Trump's policies—especially his tariff policies—might reignite price pressures in the economy. Today's CPI data could lead to a tense period between the Federal Reserve and the White House.

Four years ago, former U.S. Treasury Secretary Summers criticized U.S. fiscal and monetary policymakers for overly stimulating the economy, potentially triggering the worst inflation in a generation. He warned again on Tuesday that there is a risk of price pressures resurfacing.

Summers urged the Federal Reserve to remain vigilant regarding price pressures and believes the current cycle may not see further rate cuts, but rather increases. He stated, "This could be the most sensitive moment for inflation deterioration we have experienced since the serious inflation triggered by policy errors in 2021."

Summers pointed out signs of a tightening labor market, including last week's release of January's non-farm payroll data showing significant wage increases, which has already provided context for a potential rebound in consumer prices, even before the new government takes any action.

Following the release of the Consumer Price Index report, the U.S. 10-Year Treasury Notes Yield rose by 10 basis points to 4.643%. The 2-Year Treasury Notes Yield increased by 9 basis points to 4.386%.

Economists note that seasonal factors continue to influence inflation, with January's CPI rise exceeding expectations, reinforcing the Federal Reserve's message that it is not in a hurry to resume rate cuts amid increasing economic uncertainty.

The U.S. Bureau of Labor Statistics updated the weights and seasonal adjustment factors, which the government uses to filter out seasonal fluctuations from the data to reflect price changes in 2024.

The rise in January's CPI may partly reflect price increases initiated by businesses at the beginning of the year. Companies may also have preemptively raised prices in anticipation of higher and broader tariffs on imported goods.

Core CPI rose in January, and economists indicated that this suggests that even after seasonal adjustments, seasonal effects still linger in the data.

After the release of core inflation data that exceeded expectations, U.S. Treasury traders have pushed back the estimated timing of the next Federal Reserve rate cut from mid-year to December.

According to the Chicago Mercantile Exchange's 'FedWatch' tool, the market is pricing a 99.5% probability that the Federal Reserve will keep interest rates unchanged in March, with a 0.5% probability of a 25 basis point cut. The probability of maintaining the current rate unchanged in May is 91.3%, with an 8.6% cumulative probability of a 25 basis point cut, and a 0% probability of a cumulative 50 basis point cut.

Renowned financial journalist Nick Timiraos, known as the 'Fed's mouthpiece', stated: 'The strong performance of January's inflation data makes it difficult for the Federal Reserve to justify further 're-calibrating' its rate cut path before mid-year.'

Goldman Sachs Analyst Whitney Watson stated: 'Today's inflation data may further consolidate the Federal Reserve's cautious path of easing policies. A robust labor market also provides the Federal Reserve with the space to remain patient. We believe the Federal Reserve currently may maintain a wait-and-see mode, expecting to keep interest rates unchanged at next month's meeting.'

Before the data release, Anastasia Amoroso, Chief Investment Strategist at iCapital Network, stated: 'The Federal Reserve's focus has shifted from the labor market to inflation, which is a significant shift.'

Analyst Anstey stated that just a little over half an hour before the CPI report was released, Trump posted on his social platform Truth Social that "rates should be lowered." This does not seem to be a good time. If the Federal Reserve lowers interest rates at this moment, it would surely increase the risk of ongoing price inflation.

The market is also paying attention to Federal Reserve Chairman Powell's testimony on Wednesday before the House Committee on Financial Services. This marks his second consecutive day speaking in Congress and answering questions.

On Tuesday, Powell testified before the Senate Banking Committee that policymakers are not in a hurry to lower interest rates further, implying that officials will remain patient on the issue of rate cuts.

Powell stated, "We know that reducing policy constraints too quickly or too much may hinder the progress of reducing inflation and excessively weaken economic activity and employment."

Investors are also grappling with the potential impacts of Trump's tariffs and economic policies. President Trump signed an order on Monday imposing a 25% tariff on steel and aluminum imports. He also stated that he would impose reciprocal tariffs on all trade partners.

European officials responded to Trump's tariff threats, stating that if the U.S. imposes tariffs on products from the EU, it will retaliate with its own tariffs.

EU Commission President von der Leyen stated on Tuesday, "I deeply regret the U.S. decision to impose tariffs on European steel and aluminum exports. Inappropriate tariffs imposed on the EU will not go unanswered—they will provoke firm and corresponding countermeasures."

The EU has prepared multiple lists of U.S. goods, and if Trump continues to impose tariffs, the EU will impose retaliatory tariffs on these items.

Trump stated on Wednesday on the Truth Social platform that interest rates should be lowered, which will coincide with the upcoming tariff policy, although economists expect the tariff policy to exacerbate inflation and delay rate cuts.

On Monday, Trump significantly increased tariffs on steel and aluminum imports to 25%, stating there would be "no exceptions or exemptions." He hopes this move will assist struggling U.S. industries, but it may also trigger a trade war.

ING Analyst Chris Turner stated: "For traders, even though Trump's tariff comments have become exhausting, we cannot predict whether Washington will significantly expand tariffs tomorrow. That is why we are reluctant to forecast a major correction in the dollar without macro support evidence."

Focus on individual stocks

Growth Tech stocks had mixed performances, $Intel (INTC.US)$increased by over 3%,$Tesla (TSLA.US)$Increased by over 2%.

Most AI application stocks rose, $Confluent (CFLT.US)$Increased by over 18%, $Palantir (PLTR.US)$、 $Tempus AI (TEM.US)$Rises over 2%.

The Index rose by over 2%, $EHang (EH.US)$Increased by over 18%, $21Vianet (VNET.US)$Increased by over 10%.

$CVS Health (CVS.US)$Increased by over 15%, the company's adjusted EPS for Q4 is $1.19, exceeding market expectations, while the performance guidance is solid.

Again delivering an amazing earnings report! $Upstart (UPST.US)$Soared over 28%, Q4 performance and guidance for 2025 both exceeded expectations.

Editor/ping