Inflation Spikes In January, Wall Street Rallies On Ukraine Peace Talks, Delayed Tariffs: This Week In The Markets

Inflation concerns loom over the U.S. economy, but Wall Street remains resilient as investors focus on optimism surrounding Ukraine peace talks and a tariff plan from President Donald Trump that appears less severe than initially feared—at least for now.

In January, the headline Consumer Price Index rose 3% year-over-year, exceeding expectations of 2.9%. On a monthly basis, inflation climbed 0.5%, significantly outpacing forecasts of 0.3% and marking the biggest jump since August 2023.

Energy prices were the main culprit, with fuel oil surging 6.2%, while egg prices skyrocketed 15%, hitting fresh record highs. Yet inflationary pressures were also evident among services.

Core inflation, which excludes volatile food and energy prices, edged up to 3.3% year-over-year, beating expectations of a decline to 3.1%. Additionally, inflation at the producer level surprised to the upside, signaling broad-based price pressures.

During his semiannual testimony before Congress, Federal Reserve Chair Jerome Powell reiterated there is “no rush” to cut interest rates.

In response, investors delayed expectations for the first Fed rate cut to December, signaling expectations of a prolonged period of steady rates. Some economists even speculated that a rate hike may be necessary to curb the inflationary wave.

Despite hotter-than-expected inflation, risk sentiment remained largely intact as Trump reportedly engaged in talks with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy to initiate negotiations for peace in Ukraine. This news helped keep oil prices stable for the week.

On Thursday, Trump announced a plan to impose “reciprocal tariffs” on all countries, meaning the U.S. would match other nations’ tariff rates. Yet a study period lasting until April 1 suggests there is room for negotiations before any final implementation. The U.S. dollar weakened amid the less-aggressive tariff stance.

The standout performer of the week was Intel Corp INTC, which posted its strongest weekly rally since 1975. The surge was driven by a government push to expand domestic semiconductor manufacturing. Additionally, reports emerged that Intel may join forces with Taiwan Semiconductor Manufacturing Co. TSM in a joint venture, further fueling investor optimism.

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Image created using artificial intelligence via Midjourney.