Major indexes lost ground on Tuesday as hotter-than-expected inflation data caused declines on Wall Street. A Labor Department report revealed that U.S. consumer prices rose faster than expected in January, with the increase driven by rising housing costs.
The Dow Jones Industrial Average index fell 1.4%, posting its biggest one-day drop in almost a year. Other major indexes also posted declines, with the S&P 500 and Nasdaq Composite losing 1.4% and 1.8%, respectively.
Following the release of the CPI data, the Chicago Mercantile Exchange (CME) reported a significant increase in the likelihood that the Federal Open Market Committee (FOMC) will hold interest rates in March. The chance of monetary policy tightening rose from 53 percent at the end of January to as high as 92 percent.
Unlike most types of assets, Bitcoin has shown resilience. Although Bitcoin briefly fell below $49,000, it is still well above the price it had before the data was released. The cryptocurrency even boasts a fifteen percent increase over the previous week, when it is currently settling at around $49,500.
This phenomenon underscores Bitcoin’s distinctive profit and risk profile compared to classic assets. Although it is not completely immune to market forces, its volatility can sometimes serve as a buffer against unexpected events.
But for the broader market, the future remains uncertain. CME data also revealed a significant drop in expectations for an interest rate cut by the FOMC in May. Prior to the release of the inflation report, some 58% of traders expected a reduction, but that number has fallen to just 36.1%. Attention now turns to June, where expectations of a potential cut remain in place, albeit with less certainty.
