Stock Market Today: Stocks slip on new inflation worries; earnings in focus

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U.S. equity futures moved lower Tuesday, while Treasury yields held steady at multi-month highs, as investors continued to clip Federal Reserve interest rate forecasts while looking ahead to a key set of retail and tech earnings in the holiday-shortened week.

Updated at 9:14 AM EST

Don't bet on it

Market bets on a spring Fed rate cut continue to recede, with some emerging wagers that suggest the next move could actually be higher given both the stubborn nature of underly inflation pressures and the chances of an energy price spike tied to conflicts in eastern Europe and the middle east.

"If we learned anything last week, it’s that inflation is stubborn. Tuesday’s hotter-than-expected CPI sent the S&P 500 to its second-biggest down day of past three months and the pushed the 10-year T-note yield to its highest level since November," said Chris Larkin, managing director for trading and investing at E*Trade from Morgan Stanley. 

"Last week was only the S&P’s second down week since October, and with the market sitting on one of its biggest 16-week rallies of the past 25 years, stocks could be susceptible to more bouts of volatility if hot economic data leads traders to suspect the Fed will pace itself on cutting interest rates," he added.

Market-based expectations for rate cuts in May (blue) and June (orange) continue to recede pic.twitter.com/T6IACmABzZ— Liz Ann Sonders (@LizAnnSonders) February 20, 2024

Updated at 7:42 AM EST

Every day stock gains

Walmart  (WMT)  shares jumped higher in early Tuesday trading after the world's biggest retail notched a record $647.7 billion in 2023 sales, unveiled a 9% dividend boost and topped Street forecasts in its fourth quarter earnings report.

Walmart shares were marked 2.1% higher in pre-market trading and set to open at $174.06 each, a move that would extend the stock's six-month gain to around 8.2%.

Related: Walmart beats earnings estimate, boosts dividend, agrees to buy Vizio for $2.3 billion

Stock Market Today

A faster-than-expected reading for January inflation, alongside data showing ongoing resilience in the labor market paired with improving strength in manufacturing, has largely erased any chance that the Federal Reserve will cut rates next month. 

Traders now, in fact, are pushing the odds of the first rate cut of the year to the Fed's June meeting, suggesting sticky inflation prospects are likely to keep the central bank from committing to its prior forecast of at least three rate cuts over the whole of this year.

Related: Retail sales tumble clouds impact of inflation data

The new rate outlook has lifted Treasury bond yields as well as the dollar to multi-month highs, with benchmark 10-year notes last marked at 4.273% heading into the start of the New York trading session.

Investors will also navigate a light calendar of earnings and data this week, although blue-chip names such as Home Depot  (HD) , Walmart  (WMT)  and Nvidia  (NVDA)  will all provide fourth-quarter updates over the coming days. 

With around 80% of the S&P 500 reporting December-quarter earnings so far, analysts see collective profits rising 9.6% from 2022 levels to around $475.2 billion. Looking into the coming quarter, however, the growth rate slips to 5.2%, to a share-weighted total of around $460.6 billion.

On Wall Street, stocks are looking at a softer open to start the holiday-shortened week, with futures contracts tied to the S&P 500, which has gained just under 5% so far this, set for a 16 point opening-bell decline.

Futures contracts tied to the Dow Jones Industrial Average, meanwhile, are priced for a 130 point decline while those linked to the Nasdaq suggest an 85 point pullback.

Home Depot shares were a notable early mover, falling nearly 4% to $348 after the home-improvement retailer forecast weaker-than-expected full-year profit amid a pullback in consumer demand. 

Related: Housing needs time to recover. Interest rates won't help.

Discover Financial Services  (DFS) , meanwhile, surged 13% to $125.25 after Warren Buffett-backed Capital One disclosed its plan to buy the credit card group in an all-stock deal valued at $35 billion. 

In overseas markets, Europe's regionwide Stoxx 600 was marked 0.14% lower in early Frankfurt trading while Britain's FTSE 100 edged 0.1% higher in London.

Overnight in Asia, China's central bank unveiled a bigger-than-expected cut to its 5-year prime loan rate, a key lending benchmark. But the move provided only a modest boost to domestic stocks, with the regionwide MSCI ex-Japan benchmark rising 0.32% into the close of trading.

Japan's Nikkei 225, meanwhile, was marked 0.28% lower by the end of trading in Tokyo.

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