A hotter-than-expected inflation print for March spooked investors on Wednesday.

And looking through the carnage, there appears to be a prevailing takeaway. Even if the US economy will grow faster than expected this year, shifting expectations for fewer Federal Reserve rate cuts this year could prevent the market rally from moving into smaller market capitalization companies.

On Wednesday, the 10-year Treasury yield (^TNX) spiked more than 20 basis points and the small-cap Russell 200 index (^RUT) fell nearly 3% while the S&P 500 slipped less than 1%.

The market action underscores that investor appetite for areas like small caps, which have more exposure to refinance debt at the current high interest rates, will remain muted as long as rate cut expectations keep moving out.

"Downside in rates could further catalyze a rotation to a broader group of cyclicals and even lower quality ones with poorer balance sheets," Morgan Stanley chief investment strategist Mike Wilson wrote in a note on Sunday. "Conversely, a break higher in yields could take us back into a narrow market regime."

Housing costs remained stubbornly sticky in March, raising concerns over when a recent easing of apartment rents will show up in the US government's inflation data — and if the softening will hold.

The shelter component of the Consumer Price Index, which is mostly made up of rent and homeowners' equivalent rent (OER), rose 0.4% over the previous month, matching February’s month-over-month gain, according to Bureau of Labor Statistics data released Wednesday. Shelter costs rose 5.7% year over year, also flat from the previous month's annual increase.

“The monthly pace of shelter inflation has remained stubbornly elevated around 0.45% since last June despite market-based measures of rent growth cooling much more significantly over the past year,” Parker Ross, global chief economist at Arch Capital Group, told Yahoo Finance.

Ross said he expects “the BLS measure of rent inflation to cool and reflect some of the observed softness in rents, but we now have less conviction after little progress over the past nine months.”

Apartment rents softened last year by some metrics, and economists are expecting the trend to eventually show up in CPI data, which has a lag.

Shelter costs accounted for 60% of March’s overall monthly gain in core CPI, which doesn't include food and energy, according to the BLS.

Some Wall Street economists expect the shelter component of CPI to bottom out by spring or summer of next year based on how sticky the number has remained.

Read more here.

And we are dollar watching into the close of a tough day for markets.

The US dollar climbed 1% versus the euro, its biggest gain in about nine months, after traders pushed out odds of rate cuts on the back of another hot CPI print. The US dollar index is now up about 2.2% in the past month.

A potential delay in rate cuts could mean the US dollar stays stronger for “quite some time,” Rabobank FX strategy head Jane Foley told Yahoo Finance. “If you look at the US economy, it's certainly a lot more resilient than other major economies including Europe and China,” Foley explained. “Every week it seems like US data is chasing away the possibility of a spring or even a summer rate cut from the Federal Reserve, so that in itself, interest rate differentials, is favoring the dollar.”

Why this matters: A strong US dollar this spring could weigh on sales and profits of multinational companies in the second quarter and be a risk not many investors are currently pricing in. Be on the lookout for dollar commentary on earnings calls kicking off soon.

Delta Air Lines' (DAL) stock was just below the flat line amid the broader market sell-off on Wednesday. But the airliner did impress Wall Street with its earnings release before the bell.

Yahoo Finance's Brad Smith reports:

Delta Air Lines' (DAL) first quarter results soared over expectations as demand remained resilient, driven by a steady resurgence in corporate travel.

Here's how Delta performed versus consensus estimates compiled by Bloomberg:

• Adjusted net income: $288 million vs. $235 million expected

• Adjusted earnings per share: $0.45 vs. $0.36 expected

• Revenue: $12.6 billion vs. $12.5 billion expected

"We have seen some real strong demand," Delta Air Lines CEO Ed Bastian told Yahoo Finance. "That momentum has continued internationally. It's continued domestically. ... Year to date, we've seen the 11 highest sales days in our company's history. That's a strong predictor that the spring and summer season is going to be quite healthy on the travel side.”

TSA passenger throughput in 2024 has been pacing ahead of last year's travel figures, and that's after air travel fully bounced back above pre-pandemic levels in 2023.

“We continue to see the strength of the transatlantic demand for the spring and summer continue, which is great,” Bastian said. “We're flying even higher level of capacity this summer than last, and we expect our overall pricing levels are going to remain largely the same.”

A 10-year Treasury auction saw weak demand on Wednesday afternoon, pushing yields higher.

The 10-year Treasury yield (^TNX) gained as much as 20 basis points on Wednesday afternoon, hitting nearly 4.57%, its highest level since November 2023.

On Wednesday morning, Wells Fargo chief investment strategist Christopher Harvey warned that big jumps in Treasury yields could be a feature of the current momentum market.

"What we've seen in this market is it's a momentum market not just in equities but also in rates," Harvey told Yahoo Finance. "So, when rates start to back up, they can gap higher. And that's a concern but they have to stay there. And we just don't see enough for them to stay there."

Harvey recently highlighted a 10-year Treasury yield of 5% for six months or longer as a key headwind for his S&P 500 year-end target of 5,535.

Consumers are still facing sticker shock these days at the grocery store.

The cost of groceries remained flat last month, and up 1.2.% compared to a year ago, according to today's market-moving CPI report.

This is the first month of year-over-year acceleration in US grocery prices since August 2022, breaking an 18-month streak of declaration, per a note from JPMorgan analyst Ken Goldman. Since COVID began in March 2020, the cost of food at home has seen a significant increase, up 24.6%.

Interestingly, shares of Walmart (WMT) and Kroger (KR) are higher amid today's sell-off while Target's (TGT) stock is only down slightly. The read may be that all of these grocery chains will see a lift in sales from still-sticky inflation, even if volume is not where it needs to be amid pressured shoppers.

There is little green on the screen when taking a look at the tech-heavy Nasdaq 100 (^NDX) today.

But Nvidia (NVDA), which had slid about 11% since hitting an all-time high on March 25, was up more than 1% on Wednesday.

Bank of America research analyst Vivek Arya called the recent pullback a "refreshing pause" in a new research note on Wednesday. Arya highlighted factors such as "the recent rise in inflation, volatility (VIX), AI stock fatigue, rotation towards more cyclical sectors and possibly some pruning ahead of upcoming earnings season" as reasons the stock might have traded lower over the past month.

But Arya remains constructive on Nvidia with a Buy rating and $1,100 price target, noting that this is the ninth time Nvidia has sold off by 10% or more since the launch of ChatGPT in late 2022, a key catalyst for the stock's massive AI-driven rally.

"While there is always the potential for near-term summer consolidation in NVDA stock (such as we saw from Aug-Dec last year), we believe the fundamentals are solidly on track and periods of consolidation (trading sideways) tend to set the stock up for strong moves later," Arya wrote.

Bond yields are soaring on Wednesday after the latest Consumer Price Index (CPI) report showed prices rose more than expected in March.

The 10-year Treasury yield (^TNX) gained as much as 14 basis points on Wednesday morning, touching above 4.5% for the first time in 2024. Meanwhile, the 30-year Treasury yield (^TYX) is up 7 basis points to nearly 4.58%.

Meanwhile, investor bets on interest rate cuts this year have dampened. The market is now pricing in just two interest rate cuts this year, down from a peak of seven cuts, per Bloomberg data. And pockets of the market that stock strategists had hoped would benefit from rate cuts are reacting accordingly.

The small-cap Russell 2000 (^RUT), one of Wall Street's favorite areas of the market entering this year, was down more than 2.3% on Wednesday.

Higher gasoline prices were one of the main drivers behind reaccelerating inflation in March.

Data from the Bureau of Labor Statistics released Wednesday showed headline inflation rose 0.4% over last month and 3.5 % over last year.

In the Consumer Price Index (CPI) report, the BLS noted that gasoline and shelter combined accounted for over half of the monthly increase in the index for all items.

The gasoline index increased 1.7% from the previous month after jumping 3.8% in February. The BLS noted that before seasonal adjustments, gasoline prices rose 6.4% in March.

Gasoline prices tend to rise heading into the spring as the driving season starts. Retail prices at the pump have been on an upward trend, ticking higher along with oil.

On Wednesday, the national average for gasoline stood at $3.62 per gallon, up $0.23 from one month ago, according to AAA data.

Read more here.

Another hotter-than-expected inflation report, combined with recent data that showed resilience in the labor market, has led investors to push out their expectations for interest rate cuts.

New data out Wednesday showed the "core" Consumer Price Index (CPI), which strips out the more volatile costs of food and gas, climbed 0.4% over the prior month and 3.8% over last year — matching February's data. Both measures were higher than economist expectations of a 0.3% monthly increase and a 3.7% annual gain.

“The lack of moderation in inflation will undermine Fed officials’ confidence that inflation is on a sustainable course back to 2% and likely delays rate cuts to September at the earliest and could push off rate reductions to next year," Nationwide chief economist Kathy Bostjancic wrote in a note to clients on Wednesday.

Investors' expectations for rate cuts this year shifted notably following the print. For the first time this year, investors are now expecting just two rate cuts in 2024, per Bloomberg data.

Economists are weighing in after US consumer prices came in hotter than expected in March. The general consensus? Don't expect rate cuts anytime soon.

"Today’s crucial CPI print has likely sealed the fate for the June FOMC meeting with a cut now very unlikely," Seema Shah, chief global strategist at Principal Asset Management, said in reaction to the print. "This marks the third consecutive strong reading and means that the stalled disinflationary narrative can no longer be called a blip.

"In fact, even if inflation were to cool next month to a more comfortable reading, there is likely sufficient caution within the Fed now to mean that a July cut may also be a stretch — by which point, the US election will begin to intrude with Fed decision making," Shah added.

Investors now anticipate two 25 basis point cuts this year, down from the six cuts expected at the start of the year, according to Bloomberg data.

The Consumer Price Index (CPI) rose 0.4% over the previous month and 3.5% over the prior year in March, an acceleration from February's 3.2% annual gain in prices and higher than economists had expectations.

On a "core" basis, which strips out the more volatile costs of food and gas, prices in March climbed 0.4% over the prior month and 3.8% over last year — matching February's data. Both measures were also higher than economist forecasts.

Ryan Sweet, chief US economist at Oxford Economics, said the hotter data may push more policymakers "into the two rate-cut camp."

"The Fed has a bias toward cutting interest rates this year, but the strength of the labor market and recent gains in inflation are giving the central bank the wiggle room to be patient," Sweet said. "If the Fed does not cut interest rates in June, then the window could be closed until September because there is little data released between the June and July meetings that could alter the Fed’s calculus."

"The odds are rising that the Fed cuts rates less than 75 basis points this year," he predicted.

But Greg Daco, chief economist at EY, cautioned investors to be patient: "I think we have to be very careful with this idea that it’s a play-by-play process."

In an interview with Yahoo Finance, he noted that "these types of readings do still point to disinflationary pressures. It’s still moving in the right direction, and it will take time."

Following the data's release, markets were pricing in an 80% chance the Federal Reserve holds rates steady at its June meeting, according to data from the CME FedWatch Tool. That's up from a roughly 40% chance the day prior.

More than half of investors are also betting the central bank to hold steady through its July meeting, with markets now largely anticipating the first cut will come in September.

Read more here.

US stocks opened sharply lower on Wednesday after a key inflation report showed an unexpected uptick in consumer prices last month.

The Dow Jones Industrial Average (^DJI) fell over 1%, or more than 400 points, while the S&P 500 (^GSPC) dropped about 1.2%, as did the tech-heavy Nasdaq Composite (^IXIC).

The hotter-than-expected inflation reading sent bond yields soaring and cooled investors' hopes for interest rate cuts at the beginning of the summer.

The 10-year Treasury yield (^TNX) rose as much as 14 basis points Wednesday morning, touching above 4.5% for the first time in 2024.

Subsequently, interest rate-sensitive sectors sold off, with Real Estate (XLRE) and Utilities (XLU) sinking at the open.

The Consumer Price Index (CPI) rose 0.4% over the previous month and 3.5% over the prior year in March, an acceleration from February's 3.2% annual gain in prices.

Both measures came in ahead of economist forecasts of a 0.3% month-over-month increase and a 3.4% annual increase, according to data from Bloomberg.

Futures tied to the three major indexes fell about 1% on the news.

... that clampdown isn't appearing in travel budgets, as seen in results out of Delta (DAL) this morning.

Delta said managed corporate sales grew 14% year over year in the first quarter. Particular strength was seen in "large" corporate accounts, which bodes well for earnings out of key Delta partner American Express (AXP) in a few weeks.

"We have seen some real strong demand," Delta Air CEO Ed Bastian told Yahoo Finance anchor Brad Smith. "That momentum has continued internationally. It's continued domestically. ... Year to date, we've seen the 11 highest sales days in our company's history. That's a strong predictor that the spring and summer season is going to be quite healthy on the travel side."

More folks should be talking about the weakness in shares of market leader Nvidia (NVDA).

The stock slipped below the 50-day moving average earlier this month (see chart below) and has stayed beneath that key momentum line since. Shares are off by almost 6% in April, compared to a slight decline for the S&P 500.

A sign of a rough patch ahead for markets this summer? Maybe. After all, this stock has been the leader for the bull market for well over a year. So if it's not leading, something may be off in the distance for investors.

JPMorgan strategists are out this morning saying the next bitcoin halving is slated to take place on April 16.

In case you forgot, here is Yahoo Finance anchor Brad Smith explaining precisely what a bitcoin halving is and what it could mean for the crypto.

The JPMorgan team also served up a few good charts to get you thinking about the outlook for bitcoin mining outlook, with the process potentially being a catalyst for more price gains.

Remember when the market was going up almost every single day in March?

That's not the case in April so far, and the losing ways are beginning to pile up.

The S&P 500 has now gone seven consecutive sessions without a new record, the strategy team at Deutsche Bank pointed out this morning. That marks the longest period without an all-time high since January, when the S&P 500 surpassed its 2022 peak.

The next streak to be broken could be the S&P 500's current run of five consecutive monthly gains dating back to November.