US stocks declined on Thursday, threatening to snap a three-day rally that had been fueled by renewed optimism over a temporary pause in the US-China trade dispute.
The S&P 500 slipped 0.4%, while the Nasdaq Composite fell 0.6%. The Dow Jones Industrial Average dropped 163 points, or 0.4%, weighed down by declines in heavyweight stocks Walmart and UnitedHealth.
Walmart shares lost 4% after the retailer warned that it could raise prices in response to lingering tariffs, despite reporting earnings that topped expectations and revenue that came in line with Wall Street estimates.
Technology stocks have led the recent advance. Nvidia and Tesla are both up more than 14% this week, while Meta Platforms has gained 10%. Amazon and Alphabet have risen over 6% and 8%, respectively.
Despite Thursday’s dip, investor sentiment remains relatively firm, bolstered by hopes that the trade truce could evolve into a more durable agreement.
However, continued uncertainty around tariffs and corporate pricing pressures may add volatility in the sessions ahead.
Wholesale prices drop
Wholesale prices unexpectedly dropped in April, marking the steepest decline in service costs in at least 16 years, according to data released Thursday by the Bureau of Labor Statistics.
The producer price index (PPI) fell 0.5% last month after being flat in March, defying expectations for a 0.3% increase.
The surprise decline was driven by a sharp 0.7% fall in prices for services, its largest drop since the data series began in December 2009.
Within that category, trade services led the weakness with a 1.6% drop, while margins for machine and vehicle wholesaling plunged 6.1%.
Core PPI, which strips out volatile food and energy prices, also declined by 0.4%. Economists had forecast a 0.3% gain.
The data suggest a potential easing of inflationary pressures at the producer level, offering some relief amid ongoing concerns about cost pressures in the broader economy.
Jerome Powell’s warnings
Federal Reserve Chair Jerome Powell on Thursday signaled that the US economy may be heading into a prolonged period of higher interest rates as structural changes and persistent inflation risks challenge the central bank’s policy framework.
Speaking at the Thomas Laubach Research Conference in Washington, DC, Powell said that longer-term interest rates are likely to remain elevated compared with the near-zero levels that characterized much of the post-2008 era.
He pointed to a shift in the macroeconomic landscape since the Fed’s last policy framework review in 2020, including the emergence of more frequent supply shocks and a higher potential for inflation volatility.
“Higher real rates may also reflect the possibility that inflation could be more volatile going forward than in the inter-crisis period of the 2010s,” Powell said. “We may be entering a period of more frequent, and potentially more persistent, supply shocks — a difficult challenge for the economy and for central banks.”
Although inflation expectations remain anchored near the Fed’s 2% target, Powell’s comments underscore a growing recognition within the central bank that the conditions that previously justified ultra-low rates may no longer apply.
The Fed’s benchmark rate, which was held near zero for seven years following the 2008 financial crisis, now stands in a range of 4.25% to 4.5%.
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