Schwab Market Update

Yields Leap, Stocks Dive After Sizzling CPI Data

February 12, 2025 • Joe Mazzola
Both headline and core January CPI, at 0.5% and 0.4%, rose more than expected. Also, Fed Chairman Powell returns to Capitol Hill for testimony and Cisco reports this afternoon.

Published as of: February 12, 2025, 9:18 a.m. ET

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The marketsLast priceChange% change
S&P 500® index

6,068.50

+2.06

+0.03%

Dow Jones Industrial Average®

44,593.65

+123.24

+0.28%

Nasdaq Composite®

19,643.86

-70.41

-0.36%

10-year Treasury yield

4.62%

+0.09

--
U.S. Dollar Index

108.49

+0.52

+0.48%

Cboe Volatility Index®16.93
+0.91

+5.60%

WTI Crude Oil

$72.44

-0.88

-1.23%

Bitcoin

$94,829.68

-322.85

-0.35%

(Wednesday market open) Treasury yields spiked and stocks fell 1% before the open as January consumer inflation popped far more than analysts had expected, hurting odds for rate cuts this year. The headline Consumer Price Index (CPI) climbed 0.5% monthly in January versus 0.3% expectations, and core, which excludes food and energy, rose 0.4% to top the 0.3% consensus.

Annual CPI numbers were also swollen, at 3% for headline versus consensus of 2.9%. Core annual CPI jumped to 3.3%, above 3.2% in December and above 3.1% expectations. The 10-year Treasury note yield climbed six basis points to 4.6%, the highest since January 24 and unwelcome for rate-sensitive market areas like real estate, staples and small caps. "Nothing in the report suggests that the Fed should be in a rush to cut rates," said Cooper Howard, director, fixed income strategy, at the Schwab Center for Financial Research. "It's only one report, but if inflation continues to remain elevated, the Fed will likely stay on hold."

Fed Chairman Jerome Powell visited the Senate yesterday and heads to the House today for more monetary policy testimony, where he'll likely be asked about the latest unpleasant inflation data. Powell stuck by previous remarks from late January about being in no hurry to cut rates after 100 basis points of trimming late last year. "Powell reiterated that inflation has eased but remains elevated while the labor market remains solid," Howard said. Powell didn't bite on a question about tariff policies but stood by his 2018 statement that protectionism is generally not a good recipe for economic growth.

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Three things to watch

  1. CPI deeper dive: Today's report is the first to compare against reports from early 2024 when inflation unexpectedly jumped more than expected, possibly a seasonal trend related to companies raising prices at the start of the year. Inflation cooled last year starting in April. One element that drove headline CPI last month was a 15.2% monthly rise in egg costs. But most of the gains were driven by core services, which includes shelter. The increase in core services was the highest since last March. "There may be a seasonal element to some of the categories, but it's still too high for the Fed's liking and the trend isn't moving in the right direction," Schwab's Howard said. The CME FedWatch tool now projects just 35% odds of a rate cut by June, down from around 60% a week ago. Odds of at least one cut this year are 70%, down from 90% a week ago.
     
  2. Cisco results ahead: Earnings from Cisco (CSCO) top the afternoon agenda today and could give investors a better sense of info tech demand trends. Cisco's revenue has dropped four straight quarters, with networking under pressure the last time Cisco reported in November. Still, the company lifted its full-year revenue guidance and announced hardware containing Nvidia's (NVDA) graphics processing units. Look for a possible update on that product. "Tech is the only sector in the red year to date," said Liz Ann Sonders, chief investment strategist at Schwab. "The overall market has been resilient, but many prior high-fliers have been consolidating, including five of the Magnificent Seven in negative territory year to date."
     
  3. Why rangebound? The S&P 500 index (SPX) seems stuck in an intermediate-term range between roughly 5,800 and 6,100 amid what might be a period of digestion or sideways consolidation after a strong 2024. The low end, near levels just before the election, appeared to offer support when stocks dipped in January. The top end is near recent record highs. Often, earnings season can help jolt stocks, but so far that's not the case. Fourth quarter SPX earnings growth has beaten analysts' expectations, but the major indexes arguably priced that in with a historically high 22 price-to-earnings (P/E) ratio at the start of reporting season, the same as now. Meanwhile, consensus 2025 SPX earnings growth has fallen to 13% from 14.7% on December 31, FactSet said, perhaps reflecting cautious guidance amid policy uncertainty and a strong dollar that's had companies like Coca-Cola (KO) warning of currency headwinds. Flagging hopes of near-term rate cuts and the administration's early focus on tariffs have also squelched rallies, but earnings ultimately drive stocks. Investors have bought on dips, limiting downward pressure.

On the move

  • Bitcoin (/BTC) turned lower after CPI following another slide yesterday took it to levels more than 8% below last month's peak. The recent weakness possibly reflects risk-off sentiment as Treasury yields climbed and Fed Chairman Powell repeated there's "no hurry" to lower rates.
     
  • Lyft (LYFT) plummeted 13% in pre-market trading. Earnings and revenue beat analysts' estimates, though gross bookings fell short. Investors appeared disappointed by Lyft's projection for gross bookings growth of 10% to 14% in the first quarter, a sequential decrease from 15% in the fourth quarter and 17% in 2024. Competitor Uber (UBER) also disappointed with its outlook last week. Lyft said in its call that the first quarter is typically slow due to weather, Bloomberg reported.
     
  • Super Micro Computer (SMCI) shares popped more than 10% ahead of the open despite the company's preliminary second quarter adjusted earnings and revenue missed Wall Street's expectations. The company also cut its fiscal 2025 guidance. However, the AI server maker said it expects $40 billion in fiscal 2026 revenue, well above the consensus view.
     
  • Tesla (TSLA) jumped 2% in pre-market trading but fell 6.3% yesterday and is down 16% over the past five sessions. Investors are fretting about CEO Elon Musk's distractions, Barron's reported.
     
  • DoorDash (DASH) added 6.8% ahead of the open following a mixed earnings report. The company posted solid quarterly sales and its outlook was better than analysts had expected, but earnings just missed Wall Street's average estimate.

More insights from Schwab

Trading after hours on thinkorswim®: What do you do if something big happens after the close? Learn how to take advantage of trading opportunities on the thinkorswim platform in real time, around the clock from 8 p.m. ET Sunday to 8 p.m. ET Friday, in the latest short and helpful Schwab video.

Tariff impacts assessed: The delay in implementing tariffs against Canada and Mexico and smaller-than-promised tariffs on China provide insight into the Trump administration's strategy. "Tariffs being more bark than bite (so far) supports our outlook for both heightened market volatility and our positive outlook for the markets this year," wrote Jeffrey Kleintop, chief global investment strategist at Schwab, in his latest analysis.

Chart of the day

The S&P 500 has been stuck in a range roughly between 5,800 and 6,100 since November but remains slightly above key moving averages (MA) at 6,003 for the 50-day MA and 6,032 for the 20-day moving average.

Data sources: S&P Dow Jones Indices. Chart source: thinkorswim® platform.

For illustrative purposes only. Past performance does not guarantee future results.

Upward S&P 500 index (SPX—candlesticks) progress has stalled in a range between 5,800 and 6,100, shown by the horizontal red lines in this six-month chart. Those areas could continue to represent longer-term support and resistance, with near-term support more likely at the 20-day (red line) and 50-day moving averages (blue line) just below yesterday's close. Lack of positive catalysts along with lack of new rate cuts and policy uncertainty have kept the market from resuming last year's rally.

The week ahead

Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap next week.

February 13: January Producer Price Index (PPI) and expected earnings from Deere (DE), Applied Materials (AMAT), Coinbase (COIN), Palo Alto Networks (PANW), and Roku (ROKU).
February 14: January retail sales and January industrial production.
February 17: U.S. markets closed for President's Day holiday.
February 18: Expected earnings from Toll Brothers (TOL) and Baidu (BIDU).
February 19: January housing starts and building permits, expected earnings from Carvana (CVNA).

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