Wall Street Drops as Inflation Tops Expectations


Small-capsled, gaining 7.3 percent on average for every 100 basis point rate increase, followed by mid-caps that gained 5.9 percent and large-caps that gained 2.5 percent, according to S&P Dow Jones.

The Philadelphia Fed manufacturing index rose to 25.8 in February, up from the 22.2 registered in January, coming above economists' consensus of 21.

- Stocks powered higher Monday, sending the Dow Jones industrial average up 410 points, as the market clawed back more of its massive losses from the previous two weeks. Visit MarketWatch.com for more information on this news. Buy-the-dip investors appear to have taken their advice, even though most are aware that the days of market calm are over. In the 12 months through January, the core CPI increased 1.8 per cent.

A staggering $20.38 billion has departed SPY this month, more than the combined inflows to February's top 10 asset-gathering ETFs combined but investors should not blame rising interest rates and surging Treasury yields for the recent weakness in U.S. stocks.

On the earnings front, retail giants Wal-Mart (WMT) and Home Depot (HD) are among the companies due to release their quarterly results next week. Core year-over-year CPI is running at just 1.8%.

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Based on a recent bid, this stock (GOOGL) was trading at a distance of -10.46% from 52-week high and 30.13% away from its 52-week low price. Bond yields jumped after the inflation data but did not reach levels that would be considered risky for equities.

"Maybe if we saw the yield continue to rise, if it went up past 2.90, it might hit stocks", stated Michael Antonelli, managing director for institutional sales trading at Robert W. Baird in Milwaukee. "The market recognises that challenge and is wondering how the Fed will address it", he said.

MSCI's index of stock markets across the globe .MIWD00000PUS rose 0.26 percent to gain 4.3 percent for the week, the best weekly performance since December 2011.

What is clear is that any overheat/burnout of the US market can go global. Therefore, the fund's excess return is predictable to underperform the benchmark by 35% in up markets and outperform by 35% during down markets.

While the Dow and the S&P 500 closed higher for sixth consecutive session, the tech-heavy Nasdaq dipped 16.96 points or 0.2% to 7,239.47. Amazon rose $36.54, or 2.6 percent, to a record high of $1,451.05 and Tiffany added $2.15, or 2.1 percent, to $103.11. The consumer price index rose 0.5 percent in January, beating forecasts of a 0.3 percent increase - triggering a sharp reaction from domestic markets and from overseas.

Wall Street has now refocused on strong corporate earnings and the fact that the market has gotten less expensive.

"We are optimistic about near-term growth, but it is becoming easier to envision the end of the current, near-decade long economic expansion", Credit Suisse economists wrote in a research note.