Nasdaq drops 2% after Fed’s Jim Bullard says he favors aggressive rate hikes after inflation data

• US stocks fell on Thursday after hotter-than-expected inflation data and hawkish comments from the Fed’s James Bullard. 
• A 7.5% jump in the consumer price index led to the market pricing in six Fed rate hikes this year.
• “I was already more hawkish but I have pulled up dramatically what I think the committee should do,” Bullard said.

US stocks closed lower on Thursday after hotter-than-expected inflation data and hawkish comments from the Federal Reserve’s voting member and president of the St. Louis Federal Reserve Bank, James Bullard. 

The Consumer Price Index rose 7.5% in the year through January, surpassing the median economist estimate of 7.3% and marking the biggest rise since 1982. The index also rose 0.6% month-over-month, suggesting that the recent Omicron wave added to inflationary pressures.

With a continued rise in inflation, bond yields surged, as did the likelihood of more rate hikes by the Federal Reserve this year. The 10-Year US Treasury Yield hit 2% for the first time since 2019, while the market is now pricing in up to six rate hikes by the Fed this year. 

Here’s where US indexes stood at the 4:00 p.m. ET close on Thursday:

• S&P 500: 4,504.06, down 1.81% 
• Dow Jones Industrial Average: 35,241.69, down 1.47% (526.37 points)
• Nasdaq Composite: 14,185.64, down 2.1%

Bullard told Bloomberg that he now favors a 50 basis point rate hike at its upcoming meeting in March, and wants there to be a total of 100 basis point rate hikes by July.

“I was already more hawkish but I have pulled up dramatically what I think the committee should do,” Bullard told Bloomberg. The Fed Funds future markets now rank the likelihood of a 50 basis point interest rate hike in March at 63%. The likelihood was closer to 30% yesterday.

“I see no reason why you can’t remove accommodation just as fast as you added accommodation, especially in an environment where you have the highest inflation in 40 years,” Bullard added.

Some economists seem to agree with Bullard, including ING Economics. “With wages, commodity prices and supply chain strains all contributing, the Fed will need to respond aggressively with a very real prospect that they choose to signal their resolve with a 50bp March move,” ING Economics said in response to Thursday’s CPI data.

Thursday’s sell-off hit the tech sector the hardest, with the Nasdaq 100 falling as much as 2% as tech stocks are seen as highly sensitive to the trajectory of interest rates.

Meanwhile, developments in the metaverse continued to heat up on Thursday, with luxury hand-bag maker Gucci buying a plot of virtual land in The Sandbox to create themed experiences. 

McDonald’s is also getting in on the metaverse, signaled by its filing of a trademark for a virtual restaurant that will actually deliver food to your home.

On Wednesday, Roblox and the NFL launched “NFL Tycoon” ahead of this weekend’s Super Bowl. The metaverse hangout game is a virtual destination for NFL fans to build and manage their own sports team. 

The ApeDAO token continues to rise as its community moves forward with the planned liquidation of its NFT collection, which includes Bored Apes and CryptoPunks. The DAO hopes to receive up to $38 million for its Bored Ape collection.

West Texas Intermediate crude oil rose as much as 0.56% to $90.16 per barrel. Brent crude, oil’s international benchmark, fell as much as 0.33% to $91.23 per barrel.

Gold fell as much as 0.37% to $1,829.80 per ounce.