Rising inflation is back

Food and gasoline prices are rising again as US inflation picked up broadly at the start of the year, with economists warning President Donald Trump’s tariffs against China, on steel imports and potentially against huge trading partners Canada and Mexico will only accelerate the trend.

The monthly consumer price index rose in January by the most since August 2023, led by a range of household expenses like groceries and gas as well as housing costs. Excluding often-volatile food and energy costs, the so-called core CPI climbed 0.4%, more than forecast, fueled by car insurance, airfares and a record monthly increase in the cost of prescription drugs.

The chances of interest rate cuts are even more remote now given that on Tuesday—before the fresh numbers came out—Fed Chair Jerome Powell expressed an unwillingness to change rates in the near term. On Wednesday, he added to that sentiment by saying the latest consumer price data show there’s more work to do.

“I would say we’re close, but not there on inflation,” Powell told the House Financial Services Committee. While acknowledging the reading came in above almost all forecasts, he cautioned against over-reaction. “We don’t get excited about one or two good readings, and we don’t get excited about one or two bad readings.” —David E. Rovella

What You Need to Know Today

Rate-cut hopeful investors didn’t take all of their marbles and go home on Wednesday. While traders sent bond yields soaring after news of the hot inflation data, stocks mostly recovered initial losses as tech buyers stepped in. Treasury 10-year yields soared the most since Dec. 18 as money markets now project any rate cut this year, if one even happens, won’t be until December. At the Blue Chip Daily Trend Report, Larry Tentarelli says if there is a series of two or three hot inflation reports, they could put pressure on the Fed to actually raise rates.

Robinhood Markets reported revenue that more than doubled as the online-trading firm was buoyed by crypto-market transactions around the US election. Revenue grew to $1.01 billion in the quarter, beating Wall Street analyst estimates of $940.8 million for the three-month period. Cryptocurrency revenue also exceeded expectations, increasing more than 700% to $358 million. Robinhood may be seen to have matured from its early meme-stock days (it now offers retirement products), but it nevertheless continues to push boundaries. Following the launch of its election-focused event contracts, the company dipped a toe into sports-event contracts with the Super Bowl specifically in mind. A day later, the company pulled the offering after disclosing it had received a formal request for a suspension from the Commodity Futures Trading Commission.

The domino effect may be starting. Though much if not most of what Elon Musk is doing on behalf of Trump may very well be ruled illegal, unconstitutional or both, huge sectors of American industry are now at risk, warns Barclays. As Musk orders contracts broken and expenditures stopped, the moves pose an “understated risk” for companies all across the corporate credit market, according to the bank’s analysis. Investment-grade aerospace and defense firms have the biggest exposure to government contracting with more than $200 billion of annual obligations from the US government. Healthcare and pharmaceuticals have the second largest exposure. Distributors such as McKesson and Cencora could face disruption, with the analysts noting government spending is related to purchasing for services provided via public programs and for the care of government employees or veterans.

With the US Senate on track to confirm all of Trump’s cabinet picks, one of the most controversial—Tulsi Gabbard—was sworn in today after her confirmation by all but one Senate Republican. Seen by opponents and some supporters as an apologist for authoritarians like Vladimir Putin and Bashar al-Assad, as well as Edward Snowden, the former US representative was accused by Democrats of being vastly under-qualified and even an alleged security risk to America and its allies. She now becomes the most powerful intelligence official in the nation. “Time and time again, Ms. Gabbard has rejected the findings and conclusions of our own intelligence officials and has instead chosen to, well, cozy up to dictators and our adversaries,” Senator Jacky Rosen, Democrat from Nevada, said Wednesday as the chamber voted. “If our allies no longer share intelligence with us, think about the damage that does to our national security.” Republicans said their concerns about her were outweighed by her desire to shrink America’s intelligence agencies.

Gabbard’s elevation to run America’s spy organs came after Pete Hegseth, the new defense secretary, announced the reversal of American foreign policy with regard to Russia’s 11-year war on Ukraine. Hegseth, a former cable television host who opponents also slammed as unfit for his post, proclaimed that Ukraine won’t get back all the territory Russia has occupied. The statement was made almost in tandem with news that Trump had called Kremlin leader Vladimir Putin as part of an effort to seek an end to a war that’s killed tens of thousands, destroyed whole cities and included scores of alleged Russian war crimes. The flurry of US moves left European leaders and other partners reeling. Lithuania Foreign Minister Gabrielius Landsbergis said Hegseth’s comments “sounds like abandoning Ukraine.” But not everyone in Europe is seeing the American reversal that way.

The cost to attend private schools in the US has hit all-time highs as inflationary pressures prompt institutions to boost fees. The annual tuition for a day school rose about 7.4% to $49,284 on average and for a boarding school it climbed roughly 5.3% to $73,080. The percentage increase for day schools was the most in at least a decade, according to the data from 53 independent schools rated by S&P. The sector is seeing strong demand in spite of the soaring cost.

What You’ll Need to Know Tomorrow

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