Stocks flat to lower on CPI report; Treasury yields ease

NEW YORK — Wall Street wobbled Thursday after an update on inflation raised questions about when the Federal Reserve could begin the cuts to interest rates that investors crave so much.

The S&P 500 slipped 3.21 points, or 0.1%, to 4,780.24 after swinging up and down a few times through the day. The Dow Jones Industrial Average rose 15.29, or less than 0.1%, to 37,711.02, and the Nasdaq composite edged up by 0.54, or less than 0.1%, to 14,970.19.

Stocks had been roaring toward record heights on expectations that a cooldown in inflation would convince the Federal Reserve to cut interest rates sharply in 2024, which would boost prices for investments. Thursday morning’s inflation report was seen as a test that could show whether Wall Street’s hopes had gone overboard.

It showed U.S. consumers paid prices that were 3.4% higher overall in December than a year earlier. That’s an acceleration from November’s 3.1% inflation rate and a touch warmer than economists expected.

“Today’s inflation report reinforces the notion that the market had gotten a little overexcited around the timing of rate cuts,” said Seema Shah, chief global strategist at Principal Asset Management. “These are not bad numbers, but they do show that disinflation progress is still slow and unlikely to be a straight line down to 2%.”

The inflation data sent Treasury yields on a jagged run in the bond market. After sinking from Wednesday night into Thursday, they jumped immediately after the report’s release as traders trimmed bets for the first rate cuts to arrive as soon as March.

But yields quickly began yoyoing afterward. By late afternoon, they were lower again and helping stock indexes to recover much of their earlier losses.

The yield on the 10-year Treasury slipped to 3.97% from 4.04% late Wednesday. It’s down from more than 5% in October.