The Dow Jones Industrial Average fell around 400 points on Wednesday following a hot US inflation report. However, the Dow has since recovered around 300 points to trade 0.45% down for the day at the time of writing.
Source: TradingView
US CPI Shock – A Cautionary Tale?
Consumer prices in the U.S. saw their biggest jump in almost a year and a half this January. This supports the Federal Reserve’s stance and something that Fed Chair Powell mentioned on Wednesday. The Fed Chair remained steadfast in his assessment that the central bank isn’t ready to lower interest rates yet, especially with uncertainty surrounding the economy.
Source: LSEG
Fed Chair Powell began his second day of testimony before Congress with inflation and rate cuts remaining key. Fed Chair Powell did however mention that he would caution against reading too much into today’s inflation data, reminding everyone of the Fed’s preferred inflation gauge, the PCE data.
Some other key quotes from Fed chair Powell below:
- WE WANT TO SEE MORE PROGRESS ON INFLATION
- DIDNT SEE MUCH PROGRESS ON CORE INFLATION LAST YEAR
- WE HAVE THE LUXURY OF BEING ABLE TO WAIT FOR THAT, GIVEN STRONG ECONOMY
- LAST FEW JOB REPORTS HAVE SHOWN SIGNIFICANT JOB CREATION, MAY HAVE TICKED UP AT END OF YEAR
- OFFER A NOTE OF CAUTION ON TODAY’S CPI READING; WE TARGET PCE INFLATION WHICH IS A BETTER MEASURE
- WE’LL KNOW WHAT PCE READINGS ARE LATE TOMORROW, AFTER PPI DATA
Despite Fed Chair Powell’s comments I do not think that this report should be taken lightly. ANy future inflation readings will likely feel some strain from tariffs, which could push inflation even higher.
According to reports, President Trump’s trade advisors are preparing reciprocal tariffs on every country that charges duties on US imports.
When looking at a sector breakdown, the only sector up at the time of writing was consumer non-cyclicals with basic materials down the most.
Source: LSEG
Apple (NASDAQ:AAPL) reversed higher post CPI to trade in the green for the day, but fellow magnificent 7 stocks continued to toil with NVIDIA (NASDAQ:NVDA) and Amazon (NASDAQ:AMZN) still in the red for the day.
Despite the CPI print markets remain cautious as there is still a lot of uncertainty in regard to how tariffs will impact both global growth and inflation.
Technical Analysis
From a technical standpoint, the Dow Jones has recovered quite well post the CPI release.
The index is trading at the support level 44450 having bounced out of a key confluence area earlier in the day.
The overall trend on the daily is a mixed one with a lower high finding no follow through to print a lower low. These conditions are being seen in a few different asset classes and a sign of the uncertainty prevalent in markets.
Immediate resistance rests at 44759 and 45097, with immediate support at 44200 and 43800.
Dow Jones (US30) Daily Chart, February 12, 2025
Source: TradingView (click to enlarge)
Support
- 44200
- 43800
- 43400
Resistance
- 44759
- 45097
- 45500