Rising Inflation and Declining Consumer Confidence Weigh Heavily on Wall Street
The latest "core" PCE inflation data, the Federal Reserve's preferred gauge for assessing inflation, exceeded expectations, rising 2.8% annually compared to the anticipated 2.7%. Simultaneously, the revised U.S. consumer confidence index dropped to 57 from an initial reading of 57.9—the lowest level since 2022. These developments, combined with recently announced tariffs and additional ones expected on April 2nd, heightened fears of stagflation among investors. As a result, major indices took a significant hit, with the S&P 500 falling by 2% and the Nasdaq down by 3%. This explains the flattening yield curve, as the U.S. 10-year yield, linked closely to economic outlooks, dropped 12 basis points to 4.25%, and the 2-year yield, tied more to Fed policy expectations, fell by 9 basis points to 3.91%. This scenario signals a challenging future for the Federal Reserve as it navigates between persistent inflation and slowing economic growth. However, part of this inflationar...