NEW YORK: Wall Street’s main indexes fell on Thursday after producer prices data for August raised expectations of an interest rate hike this month, while an escalating conflict in the Middle East kept oil prices above USD100 a barrel.
At 12:11 p.m. ET, the Dow Jones Industrial Average fell 350.24 points, or 0.67 percent, to 52,030.42, the S&P 500 fell 44.48 points, or 0.58 percent, to 7,591.88 and the Nasdaq Composite fell 159.02 points, or 0.61 percent, to 26,094.32.
Brent crude advanced over 4 percent to more than USD100 a barrel, clouding the outlook for equities and reinforcing expectations that interest rates could be raised this month, as supply routes through both the Strait of Hormuz and the Red Sea remained heavily disrupted by the six-month-old war that has shown little sign of easing.
Echoing that costs were on the rise, a Labor Department report showed that the Producer Price Index (PPI) rose 5.4 percent in August on an annualized basis, a touch higher than the 5.3 percent economists polled by Reuters had expected.
Although the PPI report typically gets less attention than the Consumer Price Index, which will be published on Friday, all economic indicators are under greater scrutiny ever since the central bank stopped issuing guidance on monetary policy.
“We were looking for data to come in softer than expectations. It wasn’t soft enough,” said Jim Lebenthal, chief equity strategist at Cerity Partners.
“We’re now kind of hoping for a Hail Mary from the CPI tomorrow.”
Traders now see a 70 percent chance the Federal Reserve will hike interest rates by at least 25 basis points next week, up from about 64 percent before Thursday’s report, the CME FedWatch tool showed.
The S&P 500 materials and technology indexes led losses with declines of 1.45 percent and 0.60 percent, respectively. Consumer staples was higher.
Equities have also come under pressure from elevated yields on risk-free US Treasuries. The Treasury Department said on Wednesday it would buy up to USD6 billion in longer-dated Treasury bonds as part of an effort to keep yields under control.
However, the yield on the benchmark 10-year US Treasury was at 4.9198 percent, its highest since 2023. “It’s early days. But markets may be telegraphing to (Treasury Secretary Scott) Bessent that it will be tough for him to have meaningful control over long-end rates,” ING strategists wrote.
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