Wall St slips as rate-cut bets waver on hot producer inflation data
A Labor Department report showed producer prices increased by the most in three years in July due to a surge in the costs of goods and services, suggesting a broad pickup in inflation was imminent.
Traders trimmed their Fed rate-cut expectations for the rest of the year to about 56.7 basis points, according to data compiled by LSEG, compared with around 63 bps before the report.
But they are still fully pricing in a quarter-percentage-point cut in September.
"The implication is that the Fed is going to offer a 25-bit cut in September. But it will be a hawkish cut. It's way too early still for the Fed to wish to guide the market towards an extended easing cycle," said Thierry Wizman, global FX and rates strategist at Macquarie Group.
"The next important thing will be the Expenditures Price Index later this month. If there are signals that there's inflation broadly in services, the market will take that adversely."
A separate report on Thursday showed the number of Americans filing new applications for jobless benefits fell last week.
At 11:55 a.m. ET, the Dow Jones Industrial Average (.DJI), opens new tab fell 163.83 points, or 0.36%, to 44,758.44, the S&P 500 (.SPX), opens new tab lost 9.96 points, or 0.16%, to 6,456.62 and the Nasdaq Composite (.IXIC), opens new tab lost 26.59 points, or 0.12%, to 21,686.56.
Recent data reflecting labor market weakness and a moderate rise in consumer prices had strengthened expectations that the central bank will potentially lower interest rates next month.
However, Thursday's report fanned concerns that U.S. tariffs on imports could start to impact prices in the coming months and dampen a rally in U.S. stocks that had helped the benchmark S&P 500 (.SPX), opens new tab and tech-heavy Nasdaq (.IXIC), opens new tab log record highs over the past two sessions.
On Thursday, eight of the 11 S&P 500 sectors declined, with materials (.SPLRCM), opens new tab falling the most, down 1.3%. Rate-sensitive small-caps (.RUT), opens new tab and housing stocks (.HGX), opens new tab also dropped more than 1% each.
St.Louis Fed President Alberto Musalem, a voting member on the Federal Open Market Committee this year, said a half-point rate cut at the Fed's September meeting is not warranted, a day after Treasury Secretary Scott Bessent said it was possible.
Cisco Systems (CSCO.O), opens new tab lost 1.4% after the network equipment manufacturer's broadly in-line forecast did little to encourage investors.
Deere & Co (DE.N), opens new tab fell 7.4% after the farm-equipment maker reported a lower quarterly profit and tightened its annual profit forecast, while Tapestry (TPR.N), opens new tab plunged 14.3% after the Coach handbag maker forecast annual profit below estimates.
Both companies warned of tariffs impacting their business.
In geopolitics, focus will be on President Donald Trump's upcoming meeting with Russia's Vladimir Putin as he seeks to achieve a halt to the Ukraine conflict.
Declining issues outnumbered advancers by a 3.86-to-1 ratio on the NYSE and by a 3.14-to-1 ratio on the Nasdaq.
The S&P 500 posted 12 new 52-week highs and one new low while the Nasdaq Composite recorded 57 new highs and 55 new lows.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Mail
28 minutes ago
- Daily Mail
Beloved chicken chain files for bankruptcy despite being named last year's best category in dining
A Harold's Chicken franchisee in Illinois has filed for bankruptcy, putting three suburban Chicago restaurants at risk. The operator, De'nsite, runs Harold's locations in Homewood, South Holland, and Olympia Fields. The Chapter 11 filing last month does not affect the parent company, which still operates 47 company-owned restaurants across 10 states. Harold's Chicken Shack is a Chicago institution, known for its crispy fried chicken slathered in a tangy mild sauce. Founded in 1950 by Harold Pierce — a Midway, Alabama native who moved to Chicago during the Great Migration — the chain grew from a single South Side storefront into a beloved local brand with loyal fans far beyond Illinois. The Illinois bankruptcy comes amid a 'chicken renaissance' — US restaurant chicken sales have jumped 9 percent in recent years. However, smaller operators like Harold's are struggling to compete with national heavyweights. Bojangles has been aggressively expanding, while Raising Cane's recently knocked KFC out of the nation's top three chicken chains. Harold's Chicken operates 47 company-owned restaurants in 10 states De'nsite isn't the first Harold's franchisee to falter. A Nevada-based franchise closed its North Las Vegas location after filing for bankruptcy last year, Restaurants are feeling the pinch as rent, labor, and supply costs rise. For example, Sticky's is on the brink of shuttering all its restaurants. The New York-based chain had filed for bankruptcy last year. Last year, there were 10-plus bankruptcy filings by restaurant chains. There have been more bankruptcies this year, including Del Taco franchisee Matador Restaurant Group, which operates locations in Georgia and Alabama. The Del Taco chain is currently owned by Jack in the Box. Its owners are in the process of closing 150 to 200 underperforming restaurants and seeking a buyer for the Tex-Mex chain. Another Mexican chain, On The Border Mexican Grill & Cantina, filed for bankruptcy too this year, and is closing 76 locations in 24 states. Hooters also made headlines for its bankruptcy filing earlier this year while axing restaurants amid $376 million in debt. Daily Mail has reached out to the operator De'nsite and also to the parent company, and is awaiting response.
Reuters
28 minutes ago
- Reuters
Wall St. Week Ahead Wall Street trains sights on Jackson Hole Fed gathering
Aug 15 (Reuters) - Investors will next week train their sights on Jackson Hole, Wyoming, where Federal Reserve policymakers gather for their annual policy symposium, in a search for clues on the path of interest rate cuts that could boost stocks to more record highs. This year's gathering follows a week in which consumer and wholesale price data appeared to send mixed signals about how well the economy is weathering U.S. President Donald Trump's sweeping import tariffs. Its climax will be on Friday, when Fed Chair Jerome Powell is scheduled to speak following what will have been a data-light week. After last week's flurry of data demonstrated that consumers are resilient and the jobs market is not dead, some investors still fret Powell may use the gathering to pour cold water on widespread expectations for interest rate cuts in the coming weeks, which have pushed stock indexes to multiple records, citing other figures suggesting that inflation remains a problem. "We may have a lot at stake; this is a potentially significant event this year," said Steven Sosnick, market strategist at IBKR. "What if, once again, people are going into this expecting a dovish Powell and he comes out with all guns blazing?" The futures market still expects the Federal Open Market Committee to cut rates by a quarter of a percentage point at least twice more this year, including an initial cut at its mid-September meeting. Companies likely to benefit most from lower borrowing costs have been among the big winners in recent Wall Street trading, said Andrew Slimmon, head of Applied Equity Advisors at Morgan Stanley Asset Management. "It's all about homebuilders, cyclical stocks, industrials, and materials companies," Slimmon said. Shares of leading homebuilders such as PulteGroup (PHM.N), opens new tab, Lennar (LEN.N), opens new tab, and D.R. Horton (DHI.N), opens new tab are up between 4.2% and 8.8% in the last week, as of midday Friday, thanks largely to the recent drop in mortgage lending rates. Their gains trounced the 1% rally in the Standard & Poor's 500 index (.SPX), opens new tab over the last week. The group has outpaced the broader market more dramatically over the last month, with gains of 15% to 22% compared to 3.3% for the S&P 500. But their future gains hinge on mortgage rates continuing to fall, something that a recent uptick in 10-year Treasury bond yields puts into question. Any hint by Powell that he is paying more heed to bearish signals on inflation than to other, more benign indicators might threaten those gains, Slimmon said. "The more I have seen the homebuilders rally, the more it tells me the market thinks the Fed is going to cut, which means any suggestion at Jackson Hole that this is not going to happen will make markets more vulnerable" to a selloff, he added. To keep markets calm, Powell will have to walk a fine line and underscore the Goldilocks conviction held by many investors that the economy is neither overheating nor at risk of tipping into a recession, said Ashwin Alankar, head of global asset allocation at Janus Henderson. "He can't scare the market by saying the Fed believes the economy really needs a lot of stimulus," Alankar said. Some market-watchers on Thursday said they already detected a shift in sentiment. In a note to clients, Thierry Wizman, global FX and rates strategist at Macquarie Group, said as recently as Wednesday, "the talk on the street was of a 'mega' rate cut" but that a dovish cut in September was "more grounded in reality." Other factors make Powell's comments even more important for stocks this year, investors said. In addition to the market's lofty levels and a recent slide in the Cboe Volatility Index to its lowest level this year, a string of positive second-quarter earnings results is drawing to a close, leaving investors few signals to guide them during the late-summer doldrums. "The calendar is getting pretty quiet," said Jeff Blazek, co-chief investment officer, multi-asset, at Neuberger Berman. The biggest risk of all, however, may be the market's recent euphoria, which has defied a litany of bad news and left April's tariff-driven nosedive in the rear-view mirror. "Going into this event, the more smug we feel ... the greater the risk of a market-moving reaction," said Sosnick.
Reuters
28 minutes ago
- Reuters
Breakingviews - Money solves less than half of Intel's problems
NEW YORK, Aug 15 (Reuters Breakingviews) - It will take more than a check from Uncle Sam to seal Intel's (INTC.O), opens new tab resurgence. The White House is in talks to potentially take a stake in the struggling U.S. chipmaker, Bloomberg reported, opens new tab on Thursday, citing sources familiar with the plan. Cash can help stabilize shrinking investment plans and strengthen Intel's strategic resolve. Yet it cannot alone rekindle the virtuous cycle of technological leadership and roaring sales that is ultimately needed. Intel has spent plenty of money trying to compete with Taiwan Semiconductor Manufacturing ( opens new tab, better known as TSMC. Over the past three years, it notched nearly $75 billion in capital expenditures as it tried to revitalize its manufacturing, ultimately with a view to letting its plants serve former rivals. Progress has been slow; deadlines have slipped; results shown to prospective customers have disappointed, Reuters reported. This is a very different challenge from, say, kick-starting a rare earth supply chain in the United States. Last month, the Department of Defense took a big stake in MP Materials (MP.N), opens new tab, which runs the country's only minerals-to-magnets operation. The unusual arrangement will also see the government guarantee a floor price for the company's refined materials, shielding it from fierce price competition from abroad. Intel does not face a price war, though: it is in a battle for technological dominance. What matters is raw scale at the bleeding edge of silicon development. Stuck in the PC era, prior CEO Paul Otellini fumbled the chance to move into the much larger smartphone market. Apple's (AAPL.O), opens new tab partnership with TSMC has reached a level of trust that allows the iPhone maker to guarantee enormous orders for the chips, years in advance. Simply giving Intel money cannot substitute for this dynamic. That's not to say it doesn't help: analysts had expected the company's pace of capital investment to fall by roughly $10 billion between 2024 and 2026, according to Visible Alpha. The White House might also be able to exert enough pressure to mend a rift between CEO Lip-Bu Tan and his board about whether to spin out its manufacturing business, as reported, opens new tab by the Wall Street Journal. Intel needs big customers like Apple or Nvidia (NVDA.O), opens new tab or Qualcomm (QCOM.O), opens new tab. They cannot yet make the leap without Tan delivering a sophisticated enough product. The risk is that, in its attempts to reshape the market, the Trump administration tries to force the issue with awkward kludges that stymie everyone. The president's call to have Tan fired illustrates how he is already trying to exert control. U.S. dominance of the tech sector is not a given. The balance can be easily upset. Follow Jonathan Guilford on X, opens new tab and Linkedin, opens new tab.
