Inflation Strikes Back: Wholesale Inflation Surge Shatters Rate-Cut Hopes

U.S. stocks fell sharply Friday, ending the week in negative territory after wholesale inflation came in hotter than expected. The Dow Jones dropped more than 500 points, while the Nasdaq slid -0.9% as investors reacted to the upside surprise in price pressures.

January’s Producer Price Index (PPI) rose +0.5% MoM, while Core PPI, which strips out food and energy, surged +0.8% MoM—nearly triple the +0.3% MoM forecast. The data suggests inflationary pressures remain far stickier than the Federal Reserve’s target allows.

Driving the increase was an uptick in service costs and higher retailer margins. Economists suggest companies are passing along the costs of President Trump’s tariffs to customers, even as major firms like FedEx and Skechers launch legal battles to recoup allegedly illegal duty refunds. Core goods prices climbed +0.7% MoM, led by sharp increases in cosmetics, pet food, and metals.

Because wholesale components flow into the Fed’s preferred PCE gauge, which recently hit +2.9% YoY, the report has effectively dashed hopes for a spring rate pivot. Analysts now expect the Fed to remain on pause through its March meeting.

• Core PPI surged +0.8% MoM, tripling analyst expectations

• Retailers passed tariff-related costs to consumers through higher margins

• The Fed is expected to remain on pause at its upcoming March meeting

CRCL (+34%): Circle crushed estimates as USDC circulation jumped +72% YoY and onchain volume hit $11.9T. Management guided sustained adoption, margin strength, and accelerating digital-dollar integration globally.

NFLX (+22%): Netflix walked away from a bidding war for Warner Bros., pocketing a $2.8B breakup fee while recommitting $20B to content and resuming buybacks.

DELL (+21%): Dell guided FY27 EPS growth to +25%, powered by surging AI server demand. Backlog strength and margin expansion defied expectations of slowdown.

CRWV (-11%): CoreWeave revenues soared +110%, but margin reset rattled investors. Durable profitability and GPUaaS unit economics remain the central debate despite massive AI demand.

DUOL** **(-12%): Duolingo beat Q4, but 2026 guide disappointed as management prioritized doubling DAUs over near-term margins. Growth push tempered bookings outlook and profitability.

ZM (-18%): Zoom posted a mixed quarter as enterprise growth steadied but guidance underwhelmed. AI-powered “system of action” gained traction, yet revenue acceleration remained incremental.

Mortgage rates just slipped below 6% for the first time since 2022—a small line move with outsized implications. The drop is the market quietly front-running easier financial conditions as investors price a softer growth path and a Fed that’s closer to cutting than hiking. For housing, this is the first real oxygen in years: monthly payments ease, refi chatter returns, and sidelined buyers start running the math again. But don’t mistake it for an all-clear. If the next inflation prints re-accelerate or yields snap back, this window can close fast. For now, the “rate lock” is cracking.