Wall Street Indices Slip as Producer Prices Surge, Diminishing Rate-Cut Expectations
On Friday, Wall Street’s main indices experienced a slight decline following a report of higher-than-anticipated producer prices. The data has led to a setback in the market’s speculations of an imminent interest rate cut by the US Federal Reserve.
The US Labor Department released a report revealing that producer prices in the country rose more than expected in January, driven by substantial increases in the costs of services. This development has heightened concerns that inflation may be on the rise.
In response to the report, Treasury yields saw a spike, with the benchmark 10-year note’s yield reaching 4.306 percent. Traders have been increasing their bets that the Federal Reserve may delay the first rate cut until after June.
The recent increase in producer prices follows a period of market sell-off earlier in the week triggered by hotter-than-anticipated consumer prices. However, the slump in January retail sales brought some relief on Thursday.
Brian Klimke, the Chief Market Strategist at Cetera Investment Management, remains optimistic that inflation is moderating despite the recent data. He believes that while there may be bumps along the way, inflation is not on a sustained upward trajectory. Nonetheless, he acknowledges that continued high inflation data could potentially push rate cuts to June or beyond.
The decline in Wall Street indices was exacerbated by the performance of several megacap stocks. Meta Platforms, for example, saw a 2.0 percent decrease, dragging down the S&P 500 communication services index by 1.1 percent. However, Nvidia bucked the trend and experienced a 0.9 percent increase after Oppenheimer raised its price target for the chip designer’s stock.
Meanwhile, Applied Materials soared to a record high, jumping 7.3 percent. The semiconductor equipment supplier forecasted better-than-expected second-quarter revenue due to strong demand for advanced chips used in artificial intelligence.
The tech-heavy Nasdaq is expected to end a five-week winning streak, while the benchmark S&P 500 also lost some momentum this week, although it has already gained over 5 percent since the beginning of the year.
The strong corporate earnings and growing enthusiasm surrounding the potential of artificial intelligence have aided the S&P 500 in reaching and closing above the 5,000-point milestone for the fourth time this year.
Later in the day, market focus will be on remarks made by Federal Reserve policymakers, including San Francisco Chief Mary Daly, who is a voting member this year.
On Thursday, Atlanta Fed President Raphael Bostic stated that he anticipates fewer rate cuts compared to his colleagues, partially due to his expectation of less consistent progress on inflation.
As of 9:50 am, the Dow Jones Industrial Average was down 110.10 points, or 0.28 percent, at 38,663.02. The S&P 500 had declined by 13.20 points, or 0.26 percent, to 5,016.53, while the Nasdaq Composite dropped 58.39 points, or 0.37 percent, reaching 15,847.79.
Roku experienced a significant slump of 19.4 percent after projecting a larger first-quarter loss. In contrast, crypto exchange Coinbase Global saw a 12.7 percent increase after reporting its first quarterly profit since 2021.
On the other hand, DoorDash’s shares plummeted by 12.9 percent as the delivery firm forecasted a quarterly profitability metric below expectations, primarily due to increased labor costs.
Regarding market performance, declining issues outnumbered advancers, indicating a 2.89-to-1 ratio on the NYSE and a 2.06-to-1 ratio on the Nasdaq.
Throughout the session, the S&P index recorded 30 new 52-week highs and three new lows, while the Nasdaq recorded 47 new highs and 25 new lows.
