Inflation Report Spurs S&P 500 and Nasdaq Declines, Mega-Caps Show Resilience

The S&P 500 and Nasdaq Composite experienced declines of 1.37% and 1.8% respectively, driven by an inflation report exceeding expectations that dampened hopes for an early Federal Reserve rate cut. January's Consumer Price Index (CPI) saw a 0.3% increase from the previous month and a 3.1% rise year over year, exceeding the Dow Jones economists' predictions of a 0.2% monthly increase and a 2.9% annual rise. Despite the sell-off, rate-sensitive mega-cap companies like Alphabet, Microsoft, Meta Platforms, and semiconductor firms such as Nvidia and Advanced Micro Devices showed resilience, each gaining approximately 1% in premarket trading. This rebound occurred as yields on U.S. Treasury notes, which reflect rate expectations, modestly retreated from their highest levels in over two months.

The Nasdaq corrected yesterday and is now testing the bullish trend line support. The general outlook also remains bullish, with the index rejecting the upper parallel of the bullish long channel while testing the 18000 level.