NEW YORK: Wall Street stocks retreated early Thursday after US wholesale inflation topped estimates, complicating the outlook for Federal Reserve monetary policy.
The producer price index rose 0.9 percent on a month-on-month basis, much greater than analysts expected and a surprise after Tuesday’s reading on consumer prices suggested stable inflation in spite of President Donald Trump’s tariffs.
“We’re beginning to see the impact of tariffs on inflation, and it’s starting with producer prices,” said Adam Sarhan of 50 Park Investments. “The question is: will it impact consumers? For now, the answer is not yet.”
About 15 minutes into trading, the Dow Jones Industrial Average was down 0.4 percent at 44,752.94.
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The broad-based S&P 500 dipped 0.2 percent to 6,452.85, while the tech-rich Nasdaq Composite Index slipped 0.1 percent to 21,702.61.
Futures markets have been betting that the Fed will cut interest rates in September.
The PPI report is a “most unwelcome surprise to the upside and is likely to unwind some of the optimism of a ‘guaranteed’ rate cut next month,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management.
“If we finish the day flat or even higher then that’s a strong indication that the market doesn’t need rate cuts to keep moving higher,” Zaccarelli said.
“But if the reaction is extremely negative, then it’s an indication that this bull market isn’t as robust as many have been claiming.”
Among individual companies, Deere & Co sank eight percent after it reported a drop in profits and lowered the ceiling of its full-year earnings range.
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