Stocks retreated on Thursday as stronger-than-expected wholesale inflation data tempered investor optimism over a potential Federal Reserve rate cut next month.
The Dow Jones Industrial Average fell 200 points, or about 0.5%, while the S&P 500 dropped 0.4% and the Nasdaq Composite slid 0.3%.
The pullback followed fresh record highs for the S&P 500 and Nasdaq in the previous session, fueled by a softer July consumer price inflation report that had bolstered hopes for monetary easing.
That optimism was dented by the latest producer price index (PPI) reading, which showed wholesale prices jumping 0.9% in July — far above the 0.2% increase expected by economists polled by Dow Jones.
Despite the hotter print, CME FedWatch data showed fed funds futures still pricing in a roughly 93% probability of a September rate cut, only marginally below Wednesday’s levels, though traders largely abandoned expectations for a larger half-point reduction.
Tech leaders such as Nvidia and AMD, which have driven much of the market’s gains this year, reversed course and ended lower following the report.
The inflation data reinforced concerns that easing policy too soon could reignite price pressures, adding another layer of uncertainty ahead of the Fed’s next policy meeting.
Wholesale prices go up
US wholesale prices rose sharply in July, exceeding expectations and potentially complicating the Federal Reserve’s path toward cutting interest rates next month.
The producer price index (PPI), which tracks prices for final demand goods and services, climbed 0.9% from June, far above the 0.2% increase forecast by economists.
Core PPI, excluding food and energy, also jumped 0.9%, versus expectations for a 0.3% rise.
When excluding food, energy, and trade services, the index rose 0.6%, the largest monthly gain since March 2022.
Compared with a year earlier, headline PPI advanced 3.3% — the biggest 12-month increase since February — and well above the Fed’s 2% inflation target.
Services prices drove much of the acceleration, surging 1.1% in July, also the steepest rise since March 2022.
The hotter-than-expected data underscore persistent inflation pressures and could weigh on the Fed’s decision-making ahead of its September policy meeting, where markets had widely anticipated a rate cut.
Unemployment edges lower
US unemployment benefit applications edged lower last week, signaling that employers remain hesitant to cut staff despite ongoing economic uncertainty.
Initial jobless claims fell by 3,000 to 224,000 for the week ended August 9, roughly matching economists’ expectations.
The data suggest that while businesses have slowed hiring in response to uncertainty surrounding President Donald Trump’s tariff policies, they are not engaging in widespread layoffs.
Continuing claims — a measure of the number of people still receiving unemployment benefits — slipped to 1.95 million in the prior week.
That figure has been near the highest levels since 2021 in recent months, pointing to persistent difficulty for unemployed workers in securing new jobs.
The labor market update comes as investors increasingly expect the Federal Reserve to cut interest rates at its September meeting.
A combination of cooling employment trends and muted price pressures from tariffs has strengthened the case for monetary easing.
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