Wall St dips as producer inflation data hits rate bets

Perth Now

2 days ago

Wall Street's main indexes have declined after a hotter-than-expected producer prices report dampened investor expectations of potential interest-rate cuts by the Federal Reserve this year.
A Labor Department report showed the Producer Price Index rose 3.3 per cent on an annual basis in July, higher than the 2.5 per cent gain expected by economists polled by Reuters.
On a monthly basis, it rose 0.9 per cent compared with an estimated 0.2 per cent rise.
Traders lowered their Fed rate-cut expectations for the rest of the year to about 58 basis points, according to data compiled by LSEG, compared with about 63 bps before the report.
But they are still fully pricing in a quarter-percentage-point cut in September.
"It's sending a mixed message about the economy," said Peter Andersen, founder of Andersen Capital Management in Boston.
"We have been too anxious to draw a conclusion that the economy is fine, it's not overheated. But this wholesale data does show that perhaps there is some inflation working and we shouldn't be so quick to conclude that we need to cut interest rates."
In early trading on Thursdsay, the Dow Jones Industrial Average fell 164.29 points, or 0.37 per cent, to 44,757.98, the S&P 500 lost 16.84 points, or 0.26 per cent, to 6,449.74 and the Nasdaq Composite lost 22.69 points, or 0.10 per cent, to 21,690.45.
Recent data reflecting labour 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 US tariffs on imports could start to affect prices in the coming months and dampen a rally in US stocks that had helped the benchmark S&P 500 and tech-heavy Nasdaq log record highs over the past two sessions.
On Thursday, nine of the 11 S&P 500 sectors declined, with materials, down 1.2 per cent, falling the most.
Rate-sensitive small-caps and housing stocks also dropped more than 1.0 per cent each.
Separate data showed the number of people in the US filing new applications for jobless benefits fell last week amid low lay-offs.
A report also showed San Francisco Fed president Mary Daly pushed back against the need for a 50-basis-point interest rate cut next month, a day after Treasury Secretary Scott Bessent said an aggressive half-point cut was possible.
Cisco Systems lost 1.0 per cent after the network equipment manufacturer's broadly in-line forecast did little to encourage investors.
Deere & Co fell 8.0 per cent after the farm-equipment maker reported a lower quarterly profit and tightened its annual profit forecast while Tapestry plunged 17.6 per cent after the Coach handbag maker forecast annual profit below estimates.
Both companies warned of tariffs affecting their business.
Later in the day, investors will also tune into remarks from St Louis Fed President Alberto Musalem, a Federal Open Market Committee voting member this year.
Declining issues outnumbered advancers by a 5.05-to-1 ratio on the NYSE and by a 3.38-to-1 ratio on the Nasdaq.
The S&P 500 posted four new 52-week highs and no new lows while the Nasdaq Composite recorded 24 new highs and 31 new lows.