Stocks' Decline Steepens on Bullard's Rate Hike Comments, Inflation Data

Fed's Bullard Wants Full Point Hike by July

Stocks fell further this afternoon as the Fed's James Bullard said he'd like to see rates a full percentage point higher by July.

Bullard backs at least a half-point hike on the way to a full point gain before July, the Federal Reserve Bank of St. Louis president told Bloomberg News in an interview today. Bullard votes on monetary policy.

Key Takeaways

  • Stocks fell further this afternoon as the Fed's James Bullard said he'd like to see rates a full percentage point higher by July.
  • Stocks had been pulling back from the morning's steep declines as strong corporate earnings from Walt Disney and Mattel partially offset stronger-than-expected inflation data.
  • The Consumer Price Index report released today revealed an annual inflation rate of 7.5%, higher than expected and the largest increase in 40 years.
  • Bond yields rose to their highest since July 2019.

Today's Market Movers

Stocks had pulled back from the morning's steep declines, with some indexes moving positive, as strong corporate earnings from Walt Disney Co. (DIS) and Mattel Inc. (MAT) partially offset stronger-than-expected inflation data.

The Bureau of Labor Statistics reported consumer prices in January soared higher than expected. The news sent bond yields higher, lifting concerns that the Federal Reserve will move aggressively to fight inflation. 

The yield on the 10-year Treasury note jumped more than nine basis points (BPS) and crossed 2%, reaching its highest level since July 2019. Tech stocks, which become less attractive when interest rates increase, are dropping, with each of the FAAMG stocks lower.

The market's declines had been slowed by companies reporting strong earnings. Walt Disney Company (DIS) rose after the entertainment company reported better-than-expected profit and subscriber growth (more below). Shares of Mattel (MAT) are climbing after the company beat analyst estimates for earnings and revenue. The toymaker also raised its earnings guidance for the current quarter.

Shares in Coca-Cola Co. (KO) as well as big banks like JPMorgan Chase & Co. (JPM) pared their gains.  

Chip Shortage Concerns

Lumen Technologies Inc. (LUMN) shares are plunging as the telecom company missed earnings estimates. Semiconductor company shares are declining after a key supplier of silicon wafers said it was sold out through 2026, suggesting the chip shortage will continue for years.  

Oil, Cryptocurrencies

The euro strengthened against the dollar, and oil futures are off their highs for the day, around $90.32. The price of Bitcoin moved above $45,000, its highest price since early January. Ether is also higher, but most other major cryptocurrencies are trading lower. 

Quick Hits: Editor's Picks

Inflation Continues Rapid Rise in January 2022

Unemployment Insurance Claims Continue Downtrend

Senators Warren and Daines to File Bipartisan Stock Ban Bill

MGM Q4 2021 Earnings Report Recap

The Best (and Only) Auto ETF for Q2 2022

Chart of the Day: Price Pain

cpi

Retail inflation soared more than expected in January as prices for food, energy, and housing sent the Consumer Price Index (CPI) to its highest annual hike since February 1982. 

The Labor Department reported the CPI rose 7.5% from a year ago, up from 7% in December and above the 7.2% estimate by economists. The month-over-month increase of 0.6% was above expectations as well. 

The so-called core CPI, which leaves out volatile food and energy prices, gained 6% from 2021, also more than forecasts. It was the largest annual increase in core CPI since August 1982.

Food prices were up 7% for the year after rising 0.9% last month. Energy prices were also 0.9% higher to an annual rate of 27%. Shelter costs, which make up about one-third of the total CPI, rose 0.3% in January and 4.4% from 2021.  

Energy Prices Jump

In the energy sector, fuel oil prices skyrocketed 9.5% for the month and 46.5% on an annual basis, while electricity costs gained 4.2% in January, 10.7% more than in 2021. Overall energy prices increased 27% since last year. 

Used cars and truck prices were up another 1.5% and posted an annual jump of 40.5%. 

Stock of the Day: Walt Disney (DIS)

Walt Disney Company is the top-performing stock in the Dow after the world’s largest entertainment company posted better-than-expected revenue and profit, and added more subscribers to its Disney+ streaming service than expected.

Disney reported sales soared 34% to $21.82 billion, with earnings per share of $1.06. Revenue and profit at its Parks, Experiences, and Products segment set a record, with sales up more than 100% from the year before as the lifting of COVID-19 restrictions allowed the company to open up more locations. Sales were also boosted by a ticket price increase early in the quarter. 

Disney said it had 129.8 million subscribers to Disney+ after adding 11.8 million in the period. The total was more than five million above analysts’ estimates. CEO Bob Chapek explained the increase came as Disney focused on creating new content for its most popular franchises such as Star Wars and Marvel, and the decision to bundle Disney+ with its Hulu and ESPN+ streaming services. 

Oscar-Nominated Movies

Revenue at the Media and Entertainment Distribution segment was up 15%. Disney CEO Bob Chapek pointed to movies including Oscar-nominated animated films “Encanto” and “Luca,” as well as the reboot of “West Side Story” and the thriller “Nightmare Alley” for overall gains in revenue and Disney+ demand. 

Shares of Walt Disney Company are up 4% today, although they’re down 18% over the past year.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Bloomberg News. "Fed’s Bullard Backs Supersized Hike, Seeks Full Point by July 1." Accessed Feb. 10, 2022.