More good news for Main Street is more bad news for Wall Street.
U.S. inflation came in at 2.1% in January compared with a year earlier, another sign that wages are rising for workers. The figure was higher than economists expected.
In the big picture, it’s a welcome sign that reflects the health of the economy. Wages and prices have been stagnant for years following the Great Recession, even as unemployment has fallen and millions of jobs have been created added.
But for investors, faster inflation makes it more likely that the Federal Reserve will raise interest rates more quickly this year.
Dow futures quickly flipped into negative territory in early morning trading. They were up before the inflation figure came out.
Higher interest rates are bad news for stock markets because they encourage some investors to take money out of stocks and put it into bonds, which are offering better returns after years of extremely low rates.
Fears of higher inflation triggered the sell-off that rocked Wall Street earlier this month and wiped out the year’s gains for U.S. markets. A report earlier this month showed wages rose in January at the fastest pace since 2009.
