US Stocks Finish Mixed with NASDAQ Surprisingly Higher Despite Yields Rise

The main U.S. stock indices ended Tuesday's trading session in a tumultuous trade as investors evaluated the effect of the most recent consumer pricing data on the Federal Reserve's interest rate policy.

The erratic price movement roughly mirrored the January CPI increase but decline in the annual rate reported in the U.S. consumer pricing report. All we could determine at the session's conclusion was that inflation is still high but slowing.

The market seems to have come to the conclusion that the January data did not significantly alter market expectations on the Fed's course for future interest rate rises. This suggests that investors have already priced in two further Fed rate rises for March and June, with the terminal rate of the Federal Reserve coming in at around 5.28% in July.

However, as they rely more on recent economic data and Fed speakers for direction, investors could anticipate more of the same bumpy trading in the future.

The blue chip Dow Jones Industrial Average ended Tuesday's cash market trading at 34089.27, down 156.66 or -0.46%. The tech-heavy NASDAQ Composite closed at 11960.15, up 68.36 or +0.57%, while the benchmark S&P 500 Index ended at 4136.13, down 1.16 or -0.03%.

Gains Are Limited by the Increase in Treasury Yields

On Tuesday, the stock market battled the whole day, with advances perhaps being restrained by an increase in U.S. Treasury rates.

As investors analyzed the most recent consumer price index data and evaluated the Federal Reserve's tightening plan, the yields on the 10-year and 2-year Treasury notes increased. The 6-month Treasury yield rose to 5.022%, the highest level it has ended at or above since July 2007, which was the greatest surprise.