A hot inflation print in the form of Wednesday's Consumer Price Index caused stocks to sag and bond yields to rise once again. 

Markets had essentially traded sideways in the early days of April as market participants recalibrated their bets on when the Federal Reserve will begin cutting interest rates. Although the central bank remains committed to three cuts in 2024, sticky inflation, a robust labor market and strong economic growth have pushed back expectations for when the Federal Open Market Committee (FOMC), the Fed's rate-setting group, will start easing.

As a result, Wednesday's release of the Consumer Price Index (CPI) had a huge impact on the market's thinking. Experts say a data-dependent Federal Reserve will likely push back the timing of its first interest rate cut after the CPI revealed that inflation accelerated sharply last month. Some experts contend three cuts are off the table for 2024. 

Headline inflation rose 0.4% in March, the Bureau of Labor Statistics said Wednesday, exceeding economists' forecast for a 0.3% increase. On an annual basis, headline inflation increased 3.5%. That was up from 3.2% a month ago and topped estimates for a 3.1% print.

Core CPI, which strips out volatile food and energy costs and is considered a better predictor of future prices, hit 0.4% month-to-month – just as it did the preceding two months. Economists were looking for core prices to increase just 0.3%. On an annual basis, core CPI rose 3.8%, as it did the prior month, vs expectations for a 3.7% increase.

Fed Chair Jerome Powell and the Federal Open Market Committee (FOMC) are looking for sustained evidence that inflation is down to 2% before they move to cut interest rates from a 23-year high. The latest CPI report likely changes their calculus, meaning it could be a while longer before we get monetary easing out of the next Fed meeting. Some expert commentary on the CPI report contends that three rate cuts in 2024 are now off the table. 

"Today's inflation figures likely close the door on a June rate cut, but the Fed is still highly motivated to get the cutting cycle started this year," says  Lauren Goodwin, economist and chief market strategist at New York Life Investments.

As of April 10, futures traders assigned a 15% probability to the first quarter-point cut coming in June, down from 56% a day ago, according to CME Group's ( CME ) FedWatch Tool. 

At Monday's close, the blue-chip Dow Jones Industrial Average was down 1.1% at 38,460, while the benchmark S&P 500 was 1% lower at 5,160. The tech-heavy Nasdaq Composite slumped 0.8% to 16,170.

Earnings season on deck

While this week's earnings calendar is relatively light, Friday's results from several big banks, including JPMorgan Chase ( JPM ) , Citigroup ( C/PN ) (C) and Wells Fargo ( WFC ) , mark the start of the first-quarter reporting season.

As for JPM, a consensus Buy-rated Dow Jones stock, analysts, on average, expect the money center bank to report earnings of $3.88 per share (-5.4% YoY) on revenue of $38.8 billion (-1.4% YoY).

"Global U.S. banks are likely to see a sequential improvement in March versus December results, but year-over-year comparisons are likely to be flat to lower," says CFRA Research analyst Kenneth Leon.

Leon thinks that higher interest rates will boost net interest income – a key measure of profitability for banks that shows the difference between revenue made on loans and the costs paid for deposits – while a healthy economy bodes well for loan volume growth, credit card transactions and commercial services.

JPM has one of the best chances among big banks to deliver better-than-expected Q1 results, Leon says, adding that the Dow Jones stock "has done well, and we think there is more room to run with a healthy U.S. economy and consumer, low unemployment, and stable credit." 

Nvidia ( NVDA ) bucks a down day

In single-stock news, Nvidia ( NVDA ) rallied 2% in a down market, but that may have been more due to technical, rather than fundamental, reasons.

The leading maker of chips for generative AI data centers has been one of the most important members of the Magnificent 7 stocks that drove much of the recent bull run. However, on Tuesday, NVDA stock briefly entered correction territory – or a 10% pullback from its most recent high – after Intel ( INTC ) unveiled a competing product, an AI chip called Gaudi 3.

Wednesday's rebound, likely led by technicians and bargain hunters, helped NVDA end the session in the green, but shares have come under pressure the past couple of weeks. Nevertheless, Nvidia ( NVDA ) remains one of the best stocks of all time. Anyone who put $1,000 into Nvidia ( NVDA ) stock 20 years ago would be very happy with their returns today.