Dow falls for the first day in three after hot inflation data: Live updates
Traders work on the floor of the New York Stock Exchange.
Danielle DeVries | CNBC
The Dow Jones Industrial Average slipped on Thursday after a new inflation report showed that wholesale costs rose more than expected last month.
The 30-stock index lost 97 points, or 0.2%. The S&P 500 was hovering around the flatline, as was the Nasdaq Composite. Stocks tried to mount a rally earlier Thursday morning, but were thwarted as Treasury yields hit their highs of the session.
The major averages slid after July’s producer price index reading indicated that a Federal Reserve rate cut is far from guaranteed.
Wholesale prices rose 0.9% on the month, much more than the 0.2% economists polled by Dow Jones were expecting. The index had come in flat in June. Wholesale prices can be a leading indicator for consumer prices.
To be sure, some traders looked past this PPI number because the report showed the increase was driven by a large gain in “portfolio management,” along with airfare. Without those factors the figures would have been much closer to estimates.
Despite the higher inflation number, fed funds futures were pricing in about 91% odds of a rate cut in September, only slightly lower from the day prior, according to the CME’s FedWatch tool. The futures, however, did remove any chance of a half-point cut.
“It seems to be reasonably clear at this point that this wasn’t enough to get the Fed off of another cut, or get it going on a cutting cycle,” said Scott Ladner, chief investment officer at Horizon Investments. “I think people are just like, yeah, this was not a great PPI print — certainly not what you want to see. But we’re going to want to see a couple of them before we really think that we’re getting sort of a reaccelerating inflation environment, which is really the thing that can knock the Fed off course.”
Investors came into the session riding high, with the S&P 500 and Nasdaq posting fresh record highs in the previous session. The benchmarks got a jolt earlier this week after the release of a cooler-than-expected consumer price inflation report for July.
