The S&P 500 and Nasdaq pulled back from record highs on Thursday after a stronger-than-expected producer price report raised concerns about the likelihood of interest rate cuts.
In the early hours of trading, the Dow Jones Industrial Average dropped 31.4 points, or 0.07%, settling at 44,890.84. The S&P 500 fell by 13.1 points, or 0.20%, to 6,453.46, while the Nasdaq Composite decreased by 63.9 points, or 0.29%, to 21,649.21.
Producer prices surged in July, exceeding expectations and signalling an inflation surprise for both investors and the Federal Reserve, just over a week ahead of Fed Chair Jay Powell’s key Jackson Hole speech.
The Producer Price Index for July revealed a 0.9% monthly increase in inflation for businesses, far surpassing the anticipated 0.2% rise, according to data from the Bureau of Labor Statistics released Thursday.
On an annual basis, prices climbed 3.3%, marking the sharpest increase since February. “Core” producer prices, which exclude food, energy, and trade services, rose 0.6% last month, the largest gain since March 2022, following a flat reading in June.
Year over year, core prices also increased by 3.3%, the highest since February.
Stocks dropped following the release of the data, which came just two days after the July Consumer Price Index (CPI) showed inflation pressures were largely in line with expectations.
However, core inflation reached a six-month high in July, with consumer prices climbing 3.1% from the previous year, up from 2.9% in June, still well above the Fed’s 2% target.
The PPI measures price changes from the perspective of businesses selling goods and services, while the CPI tracks changes from the consumer’s point of view.
The July data suggests that businesses may pass some of the costs from rising tariffs onto consumers, rather than absorbing them entirely