Wall Street saw a volatile session, with stocks down and bonds whipsawing after hotter-than-anticipated U.S. inflation data tempered bets on a Federal Reserve rate cut in March.

All around trading desks, the prevailing view is that the consumer price index wasn’t great, but it didn’t move the needle on expectations for the Fed’s course. In other words, investors are mostly convinced officials are done hiking and will ease policy in 2024 — even if that happens a bit later than markets are pricing. Fed Bank of Cleveland President Loretta Mester said March is probably too early to lower rates.

“The so-called ‘last mile’ requires more time to reach the final goal,” said Quincy Krosby, chief global strategist at LPL Financial. “Today’s CPI report suggests that the Fed’s initial rate cut may be later than the market is hoping for.”

The S&P 500 trimmed its weekly advance, led by losses in megacaps like Tesla Inc. and Apple Inc. U.S. 10-year yields were little changed, while still remaining above four per cent. Fed swaps priced in less monetary easing in 2024. Bitcoin pared gains after hitting US$49,000, with trading commencing for the first U.S. exchange-traded funds that invest directly in the cryptocurrency. Oil climbed after Iran seized a tanker in the Gulf of Oman.

To Michael Shaoul at Marketfield Asset Management, there’s nothing really troubling in the latest inflation data apart from the fact that it still suggests CPI will be “sticky” above the three per cent level. That hardly suggests that a wave of rapid rate cuts is about to be unleashed, he noted.

“Today’s inflation report reinforces the notion that the market had gotten a little overexcited around the timing of rate cuts,” said Seema Shah at Principal Asset Management. “These are not bad numbers, but they do show that disinflation progress is still slow and unlikely to be a straight line down to two per cent.”

While the market was probably overenthusiastic in its initial expectations, the stars should finally align for Fed cuts – most likely around mid-year, she added.

“What should be most important for investors is that the Fed is done raising rates (and this report doesn’t change that at all),” said Chris Zaccarelli at Independent Advisor Alliance. “So whether they cut in March or cut in June and whether they cut four times, three times, or only two times, shouldn’t matter too much.”

The inflation data is a disappointment for the bulls, but it may not have the biggest impact because attention will soon turn to quarterly earnings, according to David Russell at TradeStation.

Few things in the stock market or economy move in a straight line,” he noted. “It’s not great news for stocks, but it might not be fatal either.”

Corporate highlights:

U.S. aviation regulators opened a formal investigation of Boeing Co. following last week’s accident on one of its passenger planes.

JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. kick off the reporting cycle for Corporate America on Friday, after a gauge of US bank stocks gained 23 per cent last quarter, trouncing the broader market.

Chesapeake Energy Corp. agreed to acquire rival Southwestern Energy Co. for about $7.4 billion in an all-stock deal to create the largest natural gas producer in the US.

Hertz Global Holdings Inc. plans to sell a third of its US electric vehicle fleet and reinvest in gas-powered cars due to weak demand and high repair costs for its battery-powered options.

Airbus SE set a sales record in 2023 by racking up more than 2,000 net orders, as airlines splashed out on purchases amid surging demand for fuel-efficient aircraft following the pandemic.

Grifols SA Chief Executive Officer Thomas Glanzmann failed to assuage investor concerns about a critical short-seller report during an investor call on Thursday, with the shares resuming a sharp selloff.

Key events this week:

• China CPI, PPI, trade, Friday
• U.K. industrial production, Friday
• U.S. PPI, Friday
• Some of the biggest U.S. banks report fourth-quarter results, Friday
• Minneapolis Fed President Neel Kashkari speaks, Friday
• ECB chief economist Philip Lane speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.7 per cent as of 12:22 p.m. New York time
• The Nasdaq 100 fell 0.8 per cent
• The Dow Jones Industrial Average fell 0.6 per cent
• The MSCI World index fell 0.5 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.2 per cent
• The euro fell 0.2 per cent to $1.0949
• The British pound fell 0.2 per cent to $1.2715
• The Japanese yen fell 0.2 per cent to 145.98 per dollar

Cryptocurrencies

• Bitcoin rose 0.1 per cent to $46,012.58
• Ether rose 2.6 per cent to $2,593.04

Bonds

• The yield on 10-year Treasuries was little changed at 4.03 per cent
• Germany’s 10-year yield advanced two basis points to 2.24 per cent
• Britain’s 10-year yield advanced two basis points to 3.84 per cent

Commodities

• West Texas Intermediate crude rose 1.7 per cent to $72.60 a barrel
• Spot gold fell 0.4 per cent to $2,016.30 an ounce