NEW YORK: Wall Street’s main indexes slipped on Wednesday after data showed producer prices rose more than expected in February, prompting investors to price out hopes of a Federal Reserve interest rate cut this year.
The Labor Department said the Producer Price Index rose 3.4percent year-on-year, above economists’ 2.9percent forecast, with prices at risk of accelerating further as the Middle East conflict lifts shipping and oil costs. Traders now see the central bank lowering borrowing costs by at least 25 basis points in April 2027, compared with December 2026 seen before the report, according to LSEG-compiled data.
“PPI data showed that there were lingering inflation pressures even prior to the surge in oil prices,” said Angelo Kourkafas, senior global investment strategist at Edward Jones.
“The energy price spike is complicating the task. There is a risk today that we could see more Fed officials not being comfortable with any rate cuts.” Treasury yields jumped after the data, pressuring S&P 500 sectors offering higher dividends, with healthcare and consumer staples down over 1percent.
The focus will now shift to the Fed’s decision due at 2 p.m. ET, with traders expecting benchmark rates to be held steady. The greater focus will be on Chair Jerome Powell’s remarks on how tariffs, higher energy costs triggered by the Middle East crisis, and a weakening job market will influence monetary policy decisions later this year. Brent crude extended gains and reached near USD110 a barrel after an Iranian news agency reported that some facilities belonging to Iran’s oil industry in South Pars and Asaluyeh were attacked.
Travel stocks were mixed as investors weighed higher energy costs against forecast raises flagged by Delta and American in the previous session. Delta slipped 0.3percent, while American gained more than 1percent.
At 12:00 p.m. ET, the Dow Jones Industrial Average fell 445.20 points, or 0.95percent, to 46,548.06, the S&P 500 lost 39.86 points, or 0.59percent, to 6,676.23 and the Nasdaq Composite lost 129.64 points, or 0.58percent, to 22,349.89.
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