If the U.S. economy is still so strong that robust demand won't allow inflation to return to the Federal Reserve's 2% target, there's an outside chance the central bank may struggle to cut interest rates at all this year.

At least that's part of the "no landing" fears that emerged after Tuesday's surprise January inflation readout, a report that violently whipped U.S. stocks back from record highs while catapulting Treasury yields to highs for the year.

Most dramatically, the sticky consumer price update managed to take almost a full quarter-point out of market expectations for Fed easing this year.

Even though that's settled back a bit early on Wednesday, futures now see no more than 92 basis points (bps) of rate cuts in 2024. There was as much as 150 bps priced little more than a month ago.

The chances of a first move as soon as March have now been wiped to as little as 1-in-10. It's 50-50 for May and a quarter point cut is now not fully discounted until the Fed's June 12 meeting.

An overreaction to one number that's not even the central bank's favored inflation gauge?

Given the scale of the day's market reaction, you'd be forgiven for thinking U.S. inflation spiked higher again last month.

But even though it missed forecasts for a dip below 3%, headline annual CPI actually fell in January to 3.1% from 3.4% - even though core inflation was stuck at 3.9% and economists fretted over still-elevated rent and service sector price rises.

The spotlight now almost immediately shifts to the release of PCE inflation measure for January, due on Feb. 29, for a reality check on yesterday's spicy CPI and also to assess how the Fed will review price pressures more broadly going into next month's gathering.

Already on Wednesday, a sub-forecast reading for British inflation last month helped calm global markets a touch and encouraged some hopes the U.S. CPI quirk was a one-off.

But there is a chance now that, instead of markets bracing for a possible rate cut at the March 20 meeting, they will instead be speculating about whether Fed policymakers will raise their "long run" forecasts for the policy rate - or so-called "neutral rate" projections.

And even though "soft landing" and rate cuts remain the consensus view, almost one-in-five global fund managers polled by Bank of America this month now see "no landing" as the most likely scenario over the next 12 months. And that monthly survey came in even before yesterday's CPI number.

Another complication is that even though stocks fell back sharply on dimmer rate cut hopes - with the near-4% plunge in the Russell 2000 index of U.S. small caps making it the worst one-day plunge since June 2022 - the picture of sustainably more durable U.S. economic growth going forward should arguably be positive for equities.

As it stands ahead of Wednesday's bell, S&P500 and Nasdaq futures were back up about 0.5% and the Vix volatility gauge fell back to 15 after spiking to its highest level of the year on Tuesday.

Another heavy diary of corporate earnings on both sides of the Atlantic kept stock pickers in thrall.

And despite the sharp recoil in Wall St indexes on Tuesday, there were notable gainers.

JetBlue Airways soared 21.6% after activist investor Carl Icahn reported a 9.91% stake and said the carrier's stock was "undervalued".

Tripadvisor's stock jumped 13.8% as the online travel agency formed a committee to evaluate deal proposals.

And in a bizarre twist after the bell, shares in ride hailing firm Lyft soared almost 70% at one point, only to retreat again after Lyft said its statement had incorrectly put a key margin forecast at 500bps this year instead of 50bps.

The stock quickly turned tail, although remains up 15% as the firm did still beat quarterly profit estimates on Tuesday and said it would generate positive free cash flow for the first time in 2024.

Elsewhere around the world stocks were mixed, lower on Asia bourses that were open but higher again in Europe.

The dollar's surge to 2024 highs after the CPI surprise on Tuesday was also cut back today - not least against Japan's yen.

The dollar fell back 150.57, even if not far from a three-month high hit early Tuesday.

With markets wary of Japanese intervention above 150, official comments were closely eyed.

"We are watching the market even more closely," Japan's Finance Minister Shunichi Suzuki told reporters. "Rapid moves are undesirable for the economy."

Japan's top currency diplomat Masato Kanda said the nation would take appropriate action on forex if needed.

Key diary items that may provide direction to U.S. markets later on Wednesday:

* Federal Reserve Vice Chair for Supervision Michael Barr, Chicago Fed President Austan Goolsbee speak Bank of England Governor Andrew Bailey testifies in parliament

* WTO General Council meeting

* U.S. corporate earnings: Cisco Systems, Kraft Heinz, Westinghouse, Global Payments, Tripadvisor, Equinix, Ventas, Albemarle, CME, IQVIA, Arch Capital, Occidental Petroleum, American Water Works, Tyler Technologies, Rollins, CF Industries, Williams, Charles River Laboratories, Martin Marietta Materials, Generac

(By Mike Dolan, editing by Alex Richardson mike.dolan@thomsonreuters.com)