After months of stock market calm, investors reacted poorly to January inflation data. Core CPI, which removes food and energy, increased by 0.4% last month. This is the biggest increase since last April 2023.
The inflation rate puts nearly all stock sectors at risk. Both the technology and cryptocurrency markets are the most interest-rate-sensitive stocks. This puts Marathon Digital (MARA), Tesla (TSLA), Palantir (PLTR), and ARM Holdings (ARM) at risk of a steeper sell-off. Those were the most actively traded stocks on Tuesday.
Financial services may pull back from here. Although Bank of America (BAC) and the Financial Select Sector SPDR (XLF) will not fall by much, they have less upside potential from here. The Federal Reserve will keep interest rates higher for as long as it takes to slow inflation rates. This hurts mortgage demand and slows the economy. Banks thrive when the economy is booming.
Companies that sell consumer goods have less upside during inflationary times. Ford (F), Amazon (AMZN), and Proctor & Gamble (PG) are examples. Yesterday, Shopify (SHOP) lost 13.4% as investors anticipated a slowdown in e-commerce activity. The firm posted revenue of $2.14 billion in its Q1/2024 fiscal year, up by 23.7% Y/Y.
Wayfair (W), Chewy (CHWY), and Etsy (ETSY) are also higher-risk stocks today in light of the inflation report.
