Markets fall on hot economy, chance of 0.5% rate hikes


James Bullard, president and chief executive officer of the Federal Reserve Bank of St. Louis, delivers a speech in London, U.K., on Tuesday, Oct. 15, 2019.

Luke MacGregor | Bloomberg | Getty Images

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U.S. stocks are cowed by a persistently hot economy — and hawkish rhetoric from the Fed.

What you need to know today

  • U.S. stocks fell Thursday, weighed down by big declines in Microsoft, Disney and Tesla. Asia-Pacific markets followed, trading lower on Friday. Australia’s S&P/ASX 200 dropped 0.81% after the country’s central bank hinted at more rate hikes.
  • The U.S. producer price index, which measures inflation at the wholesale level, rose 0.7% in January. It was the biggest increase since June, and 0.3 percentage points higher than economists had expected.
  • China Renaissance, an investment bank that has advised mergers between major Chinese tech firms, is unable to contact its CEO Bao Fan. Chinese financial news outlet Caixin pointed out that Cong Lin, former chairman of the bank’s subsidiary, is under investigation.
  • Tesla is recalling 362,758 vehicles equipped with its experimental driver-assistant software. The company warned that the software, known as Full Self-Driving Beta, may cause vehicles to crash.
  • PRO Crypto is making a comeback in 2023, according to Bernstein analyst Gautam Chhugani. Investors may be viewing recent regulatory actions in the U.S. as less severe than they had expected.

The bottom line

Looking at the January figures, the U.S. economy is firing on all cylinders. A quick recap: The lowest unemployment rate in 53 years. A rebound in consumer spending despite higher prices. And overnight, we found out that the producer price index rose the most in eight months. This almost bizarrely strong economy implies that inflation — while still falling — remains uncomfortably high and sticky.