As of today’s developments on Investing.com, the financial markets are entering a period of heightened volatility as major macroeconomic indicators continue to weigh on investor sentiment. U.S. equities opened lower, driven by a stronger-than-expected inflation print that has rekindled fears that the Federal Reserve may delay rate cuts well into the second half of 2026. From my perspective, this shift in expectations is critical because it signals a reassessment of the so-called “soft landing” narrative that had dominated markets throughout the second half of 2025.
The U.S. Consumer Price Index (CPI) for November came in at 3.4% year-over-year versus the 3.2% expected. Core CPI, which strips out food and energy prices, remained sticky at 4.0%. This persistence in core inflation suggests that underlying price pressures are not fading as quickly as policymakers and investors had hoped. The bond market quickly reacted, with the 10-year Treasury yield climbing back above 4.3%, erasing weeks of downward momentum.
To me, this signals a clear shift away from the dovish narrative that had supported the recent stock rally. Over the past two months, equity markets — particularly tech-heavy indices like the Nasdaq 100 — had priced in as many as four rate cuts for 2026, starting as early as March. However, with today’s hotter-than-expected inflation data, Fed Fund futures have been repriced; the probability of a March cut has dropped below 40%, while bets are now shifting to a June or even September pivot.
Sector-wise, financials and energy stocks have held up relatively better, benefiting from rising yields and a mild rebound in crude oil prices. WTI crude is now trading above $74 per barrel, rebounding from its recent lows amid supply disruptions in the Middle East and a slightly improved demand outlook in China. From my view, the resilience in energy markets could provide a short-term floor for inflation, complicating the Fed’s path toward easing.
Meanwhile, technology and high-growth sectors are under pressure as investors reassess valuations in a higher-for-longer interest rate environment. Mega-cap tech names such as Apple, Nvidia, and Tesla have all posted losses exceeding 2% intraday. These stocks had led the rally throughout 2025, riding both AI optimism and rate-cut expectations. Now that the macro backdrop is shifting, we may be witnessing a rotation into more cyclical or value-oriented sectors.
From a global standpoint, the European Central Bank also struck a cautious tone today, acknowledging improvements in inflation dynamics but stopping short of committing to a definitive easing timeline. The euro gained against the dollar, reflecting the market’s perception that the ECB may become less dovish than previously thought. In Asia, China’s latest credit data showed a moderate improvement in aggregate financing, sparking a mild rally in Shanghai and Hong Kong indices, though the property sector remains a significant overhang.
In conclusion, today’s market action reflects a recalibration of monetary policy expectations in light of stubborn inflation. Investors are now entering a phase where economic data will increasingly drive price action, and any deviation from consensus — particularly on inflation or jobs — is likely to result in outsized market moves.