In today’s big story, we’re looking at what a hotter-than-expected inflation report means for markets and the economy.

• Markets: The stock market has been very kind to millennials’ portfolios in recent years.
• Tech: Target is cracking down on self-checkout lanes.
• Business: Instead of a housing bubble, maybe high home prices are just here to stay.

The consumer price index rose 3.1% year over year in January and was up 0.3% from the previous month, writes Business Insider’s Madison Hoff. Forecasters had been expecting increases of 2.9% and 0.2%, respectively.

The market didn’t take kindly to the hot report. US stocks tumbled early Tuesday and never recovered, with the S&P 500 closing 1.37% lower and the Dow Jones Industrial Average dropping 1.35%.

Some analysts were quick to suggest investors are “overreacting,” BI’s Aruni Soni reports. They pointed out that housing accounted for a big part of the January bump and flagged that there’s still a larger narrative of inflation cooling.

That silver lining doesn’t address the elephant in the room: What does the latest CPI data mean for interest rates?

But hopes of a Goldilocks economy — where growth remains high while inflation and unemployment stay low — have dimmed. Instead, we’ve reentered the never-ending economic purgatory of: “Can the Fed pull off a soft landing?”

Fed Chair Jerome Powell had already signaled the central bank likely won’t cut interest rates in March, but Tuesday’s CPI flare-up could lead to it kicking the can even further down the road.

Stubbornly elevated inflation means Powell might be less willing to cut rates and risk further fueling inflation. But keeping rates high, especially when so many expected relief early this year, is playing with fire. The US could fall into a recession this year if the needle isn’t perfectly threaded.

Rates staying elevated for longer doesn’t necessarily spell disaster for stocks, according to Bank of America. Large-cap US companies with lots of cash on hand could earn significant interest.

But not everyone is as lucky, as corporate borrowers are “pockets of stress,” according to Apollo Global Management co-president Jim Zelter.

It’s particularly painful for smaller companies, which tend to carry floating-rate debt more susceptible to elevated interest rates.

Maybe that’s why small business owners’ confidence levels are dropping, with many citing inflation as their main concern, writes BI’s Yuheng Zhan.

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🔔 Before the opening bell: US futures rebound in premarket trading after a hot inflation report dragged on stocks Tuesday.

2. A reorg at BlackRock. The world’s largest money manager is shaking up its Financial and Strategic Investors Group, which advises big clients like sovereign wealth funds, insurers, and central banks. It’s part of a bid to turn the group into “the most trusted advisor to financial institutions in our industry,” according to an internal memo seen by BI.

3. It looks like Peter Thiel timed the crypto market perfectly. The billionaire’s Founders Fund invested $200 million in bitcoin and ether between late summer and early fall last year, Reuters reported. Since the end of June, bitcoin has jumped over 60% and ether is up more than 30%.

2. Some people are already returning their Apple Vision Pros. Customers said the headset’s design, blurry screen, and lack of use cases don’t justify its $3,500 price tag. One big critic: Mark Zuckerberg.

3. Jeff Bezos’ move to Miami shows just how hard it is to tax the rich. Since leaving his longtime home of Washington, Bezos has started unloading billions of dollars worth of Amazon stock. And thanks to his new address, Bezos could save hundreds of millions of dollars in state taxes this year.

2. Brace yourselves, self-checkout fans. Target is limiting the hours you can use its self-checkout lanes in some stores. Employees told BI that staffing levels and sales volumes are key factors in the decision.

3. Government jobs are the ultimate anti-layoff “hack.” Recent waves of layoffs have made Gen Z disillusioned with corporate work. Some TikTokers are now hyping up the public sector, drawn to its solid benefits, early retirement, and student loan forgiveness plans.

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• Democrat Tom Suozzi wins New York special election, flips Santos’ old seat.
• Nightmare on Wall Street: A Lyft typo projected profit to be 10x better than it really is.

• Today’s earnings: Cisco Systems, Sony, and other companies are reporting.
• Mercedes-AMG and McLaren are set to launch their 2024 F1 cars.

Dan DeFrancesco, deputy editor and anchor, in New York. Jordan Parker Erb, editor, in New York. Hallam Bullock, editor, in London. George Glover, reporter, in London.

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