The stock market has come to a close for today, with the S&P 500 falling 1.05%. In addition, the Nasdaq 100 declined by 1.73%. In the U.S., the most important pieces of economic data came in the forms of the New Home Sales report and, more importantly, the Personal Consumption Expenditure (PCE).

New Home Sales came in much higher than expected for the month of January. Economists were expecting 620,000 sales but got 670,000 instead. Nevertheless, the average selling prices fell month-over-month (MoM), going from $528,400 to $474,400 (-10.22%).

However, it was today's inflation report that rattled the markets, as all measures came in hotter than expected across the board. On a month-over-month basis, core PCE saw a print of 0.6% versus the 0.4% forecast, while headline PCE was 0.6% versus the 0.5% MoM projection.

Year-over-year, core PCE and headline PCE were 4.7% and 5.4%, respectively, compared to expectations of 4.3% and 5%. All four measures accelerated when compared to the previous month.

This highlights just how sticky inflation actually is, as it can suddenly reaccelerate after seemingly slowing down. As a result, expectations for rate cuts in 2023 are fading away.