Equities extended their selloff on Wednesday with the S&P 500 falling more than 1.50% to the lowest level in over a year. The move was driven by a hotter than expected CPI read and took the index firmly below the 4,000 level. The CPI came in at 8.3% YOY or up 0.2% from the previous month putting an end to the idea that inflation had peaked. The next big hurdle for the market will come today in the form of the PPI index. The PPI index is also expected to subside on a month-to-month basis but may come in much hotter than expected.

With inflation on the rise, the FOMC will come under even more pressure to act. Although the Fed has said it won't hike rates by 75 basis points we feel it is on the table now. The risk for the market is not pricing in a recession because it looks like one is on the way.