Inflation is coming back into the picture

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Inflation worries drag down US markets
US stocks fell and Treasury yields rose on Tuesday, as shown by the ISM services index a big jump in prices for December. Regional Europe Stoxx 600 index added 0.32%. Actions Volvo car closed more than 9% higher after the Swedish automaker reported a new world sales record for 2024.

Meta is ending its fact-checking program
Meta on Tuesday announced it will be eliminate your third-party fact-checking program to “restore free speech” and move to a “Community Notes” model similar to Elon Musk’s Platform X system. Employees went to their internal forum and criticized the company’s decisionmade two weeks before the inauguration of US President-elect Donald Trump.

Long-term UK borrowing costs have risen
The yield on long-term UK government bonds or gilts soared to their highest level since the late 1990s after a tepid debt auction raised concerns about demand. Suzanne Streeter, head of money and markets at Hargreaves Lansdown, said there was growing concern that the UK could be facing stagflation – a scenario where inflation remains high or rises and economic growth slows.

Anthropic’s potential valuation is $60 billion
Anthropic, an artificial intelligence startup founded by former OpenAI research heads, is in the late stages of negotiations to raise $2 billion at a $60 billion valuation, CNBC confirmed. The funding round is being led by Lightspeed Venture Partners, according to a person familiar with the matter. Anthropic, which has received significant support Amazonis the creator of the AI ​​chatbot Claude.

(PRO) Stock Market Safety Signs
Howard Marks, co-founder and co-chairman of Oaktree Capital Management, who famously predicted the dot-com bubble, sees five warning signs on the stock market. While Marx isn’t calling it a bubble, he is concerned about signs of a bubble in stocks. This is what investors should pay attention to, according to Marks.

In a sign of how worried investors are now about the return of inflation, Institute of Supply Management Services Indexinflation readings, which are usually secondary to more significant data such as the consumer price index, send shockwaves through the market.

The price index in the December ISM report jumped to 64.4% from 58.2% in November, an increase of more than 10%. The reading exceeded 60% for the first time since January 2024, noted Steve Miller, chairman of the ISM’s business review committee.

This could be just the beginning of an unwanted upward trend. Miller attributes some of the expansion in service activity to “managing risks from the impact of port strikes and potential tariffs” — both of which add to inflationary pressures.

In response, investors pushed higher The 10-year Treasury yield to 4.699% during the US trading day, the highest level since April 26. They also lowered their expectations for a 25 basis point rate cut at the US Federal Reserve’s January meeting, putting the likelihood of that at 4.8%, down from an 8.6% chance just a day ago, according to CME Group’s FedWatch tool.

Actions suffered. The S&P 500 decreased by 1.11%, Art Dow Jones industrial index decreased by 0.42% and Art Nasdaq Composite down 1.89%, driven by a drop in tech stocks. Nvidia fell 6.2%, snapping its three-day winning streak.

“You’re getting a recalibration of inflation expectations and Fed rate expectations. That’s caused this slight sell-off in equity markets after earlier enthusiasm,” said Tom Heinlein, senior investment strategist at the U.S. bank’s asset management group.

But the strong ISM report also suggests the U.S. economy is still doing well, creating a favorable environment for earnings growth, Heinlein said. And as David Lefkowitz, head of U.S. information technology equities at UBS, wrote in a note on Monday, “earnings growth matters more” than earnings estimates over the next 12 months.

A single data point of a single measure of inflation does not indicate the path of inflation or corporate health for the next year. But now you should be prudent and act carefully.

— CNBC’s Jeff Cox, Sean Conlon, Piya Singh and Lisa Kayla Khan contributed to this report.