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The stock market appears to have a case of the inflation jitters.

The last few weeks of market action have shown a clear trend. Any news that could hint at higher-than-expected inflation in 2025 has sent stocks lower.

For now, the concerns haven't been long-lasting. Friday's sell-off after consumer inflation expectations hit their highest level in more than year in the University of Michigan's Survey of Consumers was nearly erased two days later.

Similar market action happened Wednesday too. January's Consumer Price Index showed prices rose more than Wall Street expected across the board.

Instantly, stock futures tied to all three major indexes were down more than 1% as markets quickly moved to price in just one interest rate cut from the Federal Reserve this year , fewer than the two investors have been pricing in for most of 2025.

This may still be too many. Some economists believe the latest inflation reading reiterates their stance that the Fed won't cut this year. And if anything, the idea of a rate hike this year is building steam; "unlikely, but they seem less inconceivable now," Bank of America US economist Aditya Bhave wrote in a note to clients on Wednesday. Deutsche Bank's Matthew Luzzetti concurred, putting the odds on a cut rather than a hike but noting a "raised" possibility.

(BofA's Bhave says it'd take "3% core PCE inflation and unanchored long-term inflation expectations" to see a hike.)

But despite the window for a hike opening wider, there wasn't much carnage in the stock market itself when the closing bell rang. The S&P 500 fell less than 0.3%, and the Nasdaq Composite actually closed slightly in positive territory. So why no real sell-off?

Perhaps there's something in the fact that markets are still pricing in a rate cut this year and even the economists who have begun talking about rate hikes note that it's not the base case. And all this keeps a part of the bull case for stocks this year intact as, for now at least, market participants don't believe the Fed is looking to make interest rates more restrictive in 2025.

This would also play a role in what Piper Sandler chief investment strategist Michael Kantrowitz believes is still the market's biggest fear: higher rates. Over the past year, a move higher in the 10-year Treasury yield ( ^TNX ) has often come as investors' hopes for rate cuts fade. Therefore, if markets move to price in rate hikes, a move higher in the 10-year Treasury yield could be expected.