us stock indexes fell thursday as investors digested another hot inflation report that showed price pressures at the wholesale level rose more than expected in january fueling concerns that the federal reserve will raise interest rates higher than expected remarks by cleveland fed president loretta mester on the need for more tightening also weighed on stocks analysts said after the january consumerprice index showed only slow progress in bringing inflation down data released thursday morning showed inflation at the wholesale level also rebounded in january us wholesale prices jumped 07 to start the new year the biggest gain since last summer offering further proof that inflation is sticky and unlikely to decline rapidly a separate measure of wholesale prices that strips out volatile food and energy costs climbed a sharp 06 last month the largest increase in 10 months todays wholesale inflation data when coupled with the cpi report suggests that the easy battles against price pressures have been won we believe the move from 9 to 6 inflation level will prove to be much less challenging than the journey from 6 to 3 wrote john lynch chief investment officer at comerica wealth management in emailed comments lynch said the stickierthanexpected inflation means the federal reserve is likely to remain steadfast in its fight against inflation with tighter policy and for longer than equity markets have been pricing in since october the strongerthanexpected wholesale inflation reading dented us stock indexes and sent treasury yields higherjor rivals rose 02 to 10411 on thursday mester in a speech said she had seen a compelling case for a halfpoint rate hike at the feds jan 31feb 1 meeting when policy makers lifted the fedfunds rate by a quarter of a percentage point see feds mester said she saw a compelling case for halfpoint hike at january meeting indeed at our meeting two weeks ago setting aside what financial market participants expected us to do i saw a compelling economic case for a 50basispoint increase which would have brought the top of the target range to 5 percent mester said mester did not have a vote at the jan 31 feb1 policy meeting the committee voted unanimously to raise its benchmark interest rate by 25 basis point to a range of 45 to 475 in comments to reporters after her speech mester said she was not presupposing what the fed would do at its next meeting in midmarch in general she said she didnt think it was wise for the fed to surprise the markets in recent sessions traders have absorbed data showing us inflation being stubbornly sticky and strong retail sales these follow a surprisingly strong jobs report at the start of the month fedfunds futures traders have largely closed a gap between the market and the fed over the path of rate hikes and now see a betterthan50 chance that expected 25 basis point increases in march and may will be followed by another 25 basis point rise in june see why traders suddenly see significant chance of a june rate hike by the fed considering these pricing developments with pressure on profit margins and interest rates investors should prepare for a retest of the october lows lynch said consequently benchmark us treasury yields are near their highest for 2023 yet the sp 500 index sits just shy of its best level since august having bounced 7 for the year to date seestockmarket bulls defiant as bond market surrenders to fed heres what to watch in other economic data construction on new us homes fell a seasonally adjusted 45 in january to 131 million the commerce department said thursday the drop in construction on homes follows the decline in december when housing starts also fell by 34 the number of americans who applied for unemployment benefits in stayed below 200000 for the fifth week in a row signaling the us labor market is still quite strong new applications slipped from to 194000 from a revised 195000 in the prior week the government said thursday