US futures fall after hotter-than-expected report on inflation

TOKYO – Stocks are falling on Wall Street after a key reading on inflation at the consumer level in the U.S. came in hotter than expected.

S&P 500 futures fell 1.1% about 10 minutes after the report from the Labor Department. Dow futures fell 0.8% and Nasdaq futures fell 1.6%. Bond yields jumped.

The Labor Department report released Tuesday morning showed that consumer prices rose 3.1% in January compared to a year ago. Economists were expecting an increase of 2.9%.

The stronger-than-expected inflation data follows recent reports showing the U.S. economy and job market remain remarkably solid. Those reports, along with some comments from Fed officials, have forced traders to push out their forecasts for when the Federal Reserve will begin to cut interest rates.

Inflation, which peaked above 9% in June 2022, had been cooling enough that the Fed has hinted it may cut its main interest rate several times this year. Such cuts typically juice financial markets and the economy, and they would release pressure that’s built up since the Fed has taken its main interest rate to the highest level since 2001.

In the bond market, yields were rising sharply. The yield on the 10-year Treasury jumped to 4.26% from 4.16%, late Monday.

The two-year Treasury yield, which more closely tracks expectations for the Federal Reserve, rose to 4.60% from 4.48% Monday.

European benchmarks slipped further after the U.S. inflation report. France’s CAC 40 slipped 0.4%, Germany’s DAX shed 0.5% and Britain’s FTSE 100 fell 0.2%.

Asian shares mostly finished higher on Tuesday.

In Asia, Japan’s benchmark Nikkei 225 added 2.9% to finish at 37,963.97, briefly topping 38,000 for the first time in 34 years. Australia’s S&P/ASX 200 lost earlier gains, edging 0.2% lower to 7,603.60. South Korea’s Kospi jumped 1.1% to 2,649.64.

Markets were closed in China, Hong Kong and Taiwan for the Lunar New Year holiday.

In energy trading, benchmark U.S. crude rose 67 cents to $77.59 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose 59 cents to $82.63 a barrel.