Market Jitters: Inflation Pressures and Fed Policy in Focus

Stock indexes dipped as 10-year Treasury yields hit 14-month highs and the U.S. dollar index reached a two-year peak, indicating a possible Fed policy shift amid inflation concerns. Markets anticipate the U.S. Consumer Price Index reading as producer prices and forthcoming employment reports stir investor anxiety.

The stock market experienced declines on Monday as 10-year Treasury yields set a 14-month record high. Investors grappled with concerns of the Federal Reserve possibly pausing its easing cycle due to persistent inflation and a resilient U.S. economy.

The U.S. dollar index surged to its highest level in over two years, causing the Nasdaq to drop, while the S&P 500 managed a slight recovery from a two-month low. Investors await key inflation indicators, with the upcoming Consumer Price Index reading highly anticipated for potential rate cut implications.

The Federal Reserve sets its eyes on U.S. inflation data, with market uncertainties heightened by President-elect Donald Trump's fiscal policies. Market participants remain cautious as U.S. Treasury yields rise, seeking certainty from forthcoming earnings reports of major banks like JPMorgan Chase. Energy price hikes further complicate the inflation landscape, pressing on investor confidence.

(With inputs from agencies.)