Here We Go Again. The market keeps serving up head fakes. After starting the day on a positive note once again, all three indexes ended the day in the red.

The Dow Jones Industrial Average fell 669 points, or 1.3%. The S&P 500 dropped 1.6% and the Nasdaq Composite sank 2.0%. The latest poor performance puts all the major averages on track for weekly declines of more than 1%.

“This is becoming a pattern,” Steve Sosnick, chief strategist of Interactive Brokers, told my colleague Connor Smith. “The U.S. market opens higher thanks to gains from overseas, then fades a bit later. Yesterday it was benign, last week it was more like this, where the declines were sharper until the requisite dip buyers emerged. We’ll see if they can once again come to the rescue and arrest the drop.”

Part of today’s slump can be attributed to the fact that existing home sales plunged 8.4% in January, according to the latest data released today. Some of the decline is likely weather related, but the data showed sales fell across all regions—with the largest decline in the South and West in percentage terms, Citi economists reported. They point out that the continuing soft demand for existing homes has become a drag on appreciation. Median home prices have increased by less than 1% year-over-year.

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When the January Consumer Price Index is released tomorrow morning at 8:30 a.m., slowing gains in the cost of services are likely to bring a softer inflation print, economists project. But don’t expect that to change the Federal Reserve’s thinking on interest rates.

Tomorrow’s report arrives after a short delay due to this month’s partial government shutdown.

Economists surveyed by FactSet expect that the headline index rose by 0.3% in January, the same monthly rate as December. Compared to a year ago, however, inflation is expected to register just 2.5%, a pullback from the 2.7% annual growth in December. 

While food prices are expected to be higher, that will likely be offset by a decline in the cost of energy due to falling prices at the pump. That should help deliver a cooler overall result. 

Core inflation, which excludes food and energy costs, is projected to be 0.3% for January as well, a bit of an acceleration from December’s 0.2% monthly growth. Economists expect core CPI was also 2.5% year over year in January, cooling slightly from the 2.6% rate in December. 

Yet even a good result would likely have only a limited impact on the Federal Reserve as policymakers weigh their next decision on interest rates, writes Stephen Juneau, U.S. economist at Bank of America Securities. The Federal Open Market Committee next meets on March 17-18.

“Inflation has taken a back seat to labor-market data, despite remaining above the Fed’s 2% target for nearly five years,” Juneau writes. “Unless demand-driven inflation shows clear signs of reacceleration or inflation expectations become unanchored to the upside, the Fed is likely to remain more focused on labor-market dynamics.”

Like yesterday’s jobs report, the January CPI report will be a bit harder to read than usual due to the bureau recalculating seasonal adjustments to align with price movements throughout the past year. But investors shouldn’t shrug off any unexpected results, says Omair Sharif, founder of Inflation Insights. He points out people blamed large increases in core inflation in January 2024 and January 2025 on “residual seasonality,” when the real culprit was larger-than-usual price increases.

In any case, economists don’t believe the potential decline in the inflation rate will last. And some see a risk that the January data could come in stronger than expected. 

Economists with Royal Bank of Canada are expecting to see core inflation accelerate in January to 0.4% month over month, which would translate into a steady 2.6% year-over-year gain, compared with the consensus call for monthly gain of 0.3% and an annual increase of 2.5%. 

“We typically see inflation heat up in January as the combination of new year price increases and lagged seasonal factors have elevated January prints since 2021,” writes Mike Reid, head of RBC’s U.S. economics team. But he also expects to see early signs that wholesalers are now passing tariff-related cost increases through to their customers.

Tomorrow’s report won’t be the final word on inflation, either. Policymakers will have another three inflation readings, from the BLS and the Bureau of Economic Analysis, to digest before the Fed’s March meeting.

Cameco, Enbridge, and Moderna release quarterly results tomorrow.

The BLS releases the consumer price index for January.

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