Stocks Closed Sharply Lower After Disappointing Inflation Report

Market Moves You Need to See Stocks Closed Sharply Lower After Disappointing Inflation Report [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks Closed Sharply Lower After Disappointing Inflation Report [Stocks Closed Sharply Lower After Disappointing Inflation Report]Image: Shutterstock Stocks closed sharply lower yesterday with all of the major indexes down by -1.30% or more. The small-cap Russell 2000 and the mid-cap S&P 400, after leading the advance on Monday, led the decline yesterday giving up -3.96% and -2.44% respectively. Yesterday morning's Consumer Price Index (CPI) inflation report came in higher than expected. Headline CPI rose 0.3% m/m vs. last month's 0.2% and views for the same. On a y/y basis it came in at 3.1% vs. last month 3.4% and the consensus for 3.0%. The core rate (ex-food & energy) rose 0.4% m/m vs. last month's 0.3% and views for 0.3%. The y/y rate showed inflation at 3.9%, unchanged from last month's 3.9%, and above views for 3.7%. While the headline number did decline, even though it declined less than expected, the core rate showing no change at all spooked investors. One less than optimal report, however, is not likely to alter the Fed's thinking. But it does put more pressure on the subsequent inflation reports to see if yesterday was an anomaly, or if we can expect to see the rate of inflation decline at a slower pace or even pause. The next inflation report comes out on Friday with the Producer Price Index (PPI). That comes out at 8:30 AM ET. Quite frankly, it all felt a bit overdone. We're talking about two-tenths of a percentage point from the average guess, no change from last month's reading (for core), and inflation actually fell three-tenths of a percent for the headline number. In other news, earnings season continues. After the close, Lyft reported a 137% positive EPS surprise, and a 0.60% positive sales surprise. They were down by -2.18% in the regular session before earnings, then popped roughly 20% in after-hours trade. Note, they were up more than 60% at one point in after-hours due to a misstatement in a Lyft press release where it said margins had expanded by 500 basis points (5%) rather than the actual 50 basis points or 0.5% it was supposed to say. Nonetheless, it was a good report, and a solid move afterwards. Airbnb reported after the close and posted a positive EPS surprise of 13.4%, and a positive sales surprise of 2.57%. That represents a quarterly EPS growth rate of 58.3% vs. this time last year, and a 16.8% sales growth. They were down -1.94% in the regular session before earnings, and shed another -4.5% in after-hours. And Robinhood reported after the bell and posted a 400% positive EPS surprise, and a 3.12% positive sales surprise. For earnings, that came out to a 3 cent gain vs. last year's -19 cent loss, on a 23.9% increase in revenue to $471 million vs. 4 quarters ago of $380M. Shares were down -1.42% in the regular session, but rose more than 10% after-hours. Today we'll get another 183 companies set to report with headliners like The CME Group and Sony reporting before the open, and Occidental Petroleum and Cisco going after the close. In other news, yesterday's NFIB Small Business Optimism Index dipped to 89.9 vs. last month's 91.9 and views for 92.4. Today we'll get MBA Mortgage Applications. We'll hear from Austan Goolsbee, President and CEO of the Federal Reserve Bank of Chicago today as he participates in a moderated discussion on international economics and U.S. monetary policy at the Council on Foreign Relations. And we'll see if the market can regroup after yesterday's roughest trading day of the year so far. 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