U.S. stock futures were higher after initially selling off following January inflation data that came in hotter than expected.
The January Consumer Price Index (CPI) released by the Bureau of Labor Statistics Tuesday morning showed prices rose more than expected in the first month of the year. The report said prices rose 0.5% over the prior month on a headline basis and 0.4% on a “core” basis, which strips out the more volatile costs of food and energy.
Over last year, headline inflation rose 6.4% in January while core inflation rose 5.6%. These marked the smallest annual increases since October 2021 and December 2021 for these readings, respectively. Still, both remain well above the Federal Reserve’s 2% inflation target.
Economists had expected headline inflation to rise 0.5% over last month and 6.2% over last year, according to estimates from Bloomberg.
“If you look at the 12-month change, we saw some pretty hefty inflation. It’s down substantially from the peak, and we’ll probably see inflation continue to moderate as the year goes on. But even by year-end, optimistically, inflation is still going to be up 3%, maybe 3.5% from a year and a half ago,” Cumberland Advisors chief U.S. economist David W. Berson told Yahoo Finance Live Monday.
“My guess is the Fed will not ease this year — it may not tighten much more, we might see Fed funds at the peak go a little above 5% — but that’s very different from an expectation that by year-end the Fed will ease.”
EY-Parthenon Chief Economist Gregory Daco deemed the Federal Reserve’s “extreme” data dependence a a “risky strategy in a highly volatile global macroeconomic environment.”
“By devolving control of the narrative, the Fed exposes itself to potential abrupt pivots in market sentiment depending on the flow of economic data, which has been and will likely continue to be extremely volatile,” Daco said in an emailed note.
A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., February 1, 2023. REUTERS/Andrew Kelly
Back on the corporate side, shares of Palantir Technologies (PLTR) surged 17.7% pre-market Peter Thiel-founded data firm reported its first-ever profitable quarter and said it expects 2023 to be its first profitable year.
Tesla (TSLA) increased the price of its Model Y performance crossover by $1,000 to $58,990, while cutting the price of the Model 3 sedan by $500 to $42,990, Reuters pointed out based on updates on the company’s website. This marks the fourth price change in two months. On Monday, Tesla logged its biggest two-day drop in more than a month, falling 6.1% across the past two trading sessions.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc