SPX-500: US stock futures tumble after upbeat CPI

• US core inflation rose above expectations in January a sign of the rising economy finally generating some price pressures.
• The US core retail sales disappointed in January.

US stock futures (SPX-500) are now trading down 0.4% at around 2,643 during pre-New York session, after the US inflation figures surprised on the upside rising 0.5% m/m and 2.1% y/y in January. At the same time, the US core retail sales fell -0.3% m/m in January. The news is equity market negative with main indices instantly falling in a knee-jerk reaction. The combination of low growth and higher inflation known as “stagflation” scared investors that sold futures to their intraday low of 2,627.

The much awaited and the “most important ever” US core CPI for January rose 0.3% m/m compared to 0.2% m/m increase expected by the market. When compared to a year ago, the core inflation rose 1.8% y/y vs estimate of 1.7% y/y. The headline CPI rose 2.1% vs estimate of 1.9% dwelling at the unchanged level from December. 

The core retail sales in the US stagnated in January compared to the market estimate of 0.5%.

Subsequently, US10YTSY yield surged to 2.882% and SPX-500 tumbled and USDJPY jumped as the market is now discounting a hawkish Fed, looking for at least 3 rate hikes in 2018 to stay ahead of the inflation curve.