Investors were taken by surprise that US inflation did not fall as expected in January, instead remaining at 2.1 per cent, driven by sharp increases in clothing and energy costs.
Analysts had expected the number to fall to 1.9 per cent, and the higher figure sent jitters through markets - though the volatile indices quickly recovered their losses.
The S&P 500 veered between losing 0.5 per cent and gaining the same amount, while the Dow Jones Industrial Average lost 0.6 per cent before recovering to enter positive territory.
Bond yields also increased on the news as investors anticipated higher interest rates, with the yield on the benchmark 10-year US Treasury jumping to a new four-year high of 2.91 per cent.
The twitchy moves follow a sharp sell-off at the start of this month which was triggered in part by strong wage growth figures that led to fears that inflation was on the rise, and so interest rates would have to go up more sharply than previously thought. As a result, the persistence of inflation will worry traders, who are on a hair trigger when it comes to official data.
