US stocks continue to slip mid-session after PPI surges, amid persistent expectations of September rate cut

US stocks continue to slip mid-session after PPI surges, amid persistent expectations of September rate cut

US equities reversed early gains and slipped modestly by midday as hotter-than-expected wholesale inflation stoked doubts over the pace of Federal Reserve rate cuts, though expectations of a September trim remain intact.

The Dow Jones Industrial Average dropped around 164 points, the S&P 500 fell about 17 points, and the Nasdaq lost nearly 23 points.

Producer prices surged 0.9% in July, the sharpest monthly climb since June 2022 and well above the anticipated 0.2%. On a yearly basis, PPI swelled 3.3%, compared to expectations near 2.5%.

Despite the spike, markets remain hopeful for a 25-basis-point rate cut in September, with CME FedWatch pricing those odds near 93–94%. Any larger cut appears off the table for now.

Treasury yields ticked higher, especially the two-year note. The dollar also strengthened, as longer-term rate expectations get recalibrated.

Nine of 11 S&P 500 sectors are lower, led by materials and small-cap names. Notably, AI stock Coherent plunged nearly 19% after disappointing Q2 earnings—one of the sharpest individual moves dragging sentiment.

This afternoon’s dip is less a signal of panic and more a recalibration—markets are digesting fresh inflation data while still balancing on the edge of rate-cut optimism. Investor focus now shifts to upcoming inflation releases and commentary at next week’s Jackson Hole symposium, where policymakers may reveal the direction of monetary policy.

European Markets 

European equities were trading cautiously as the day wound down in India:

London’s FTSE 100 was marginally lower, under pressure from mining and energy stocks.

In Germany, the DAX inched higher, supported by ongoing earnings optimism.

France’s CAC 40 extended gains for the third straight session, buoyed by hopes for global rate cuts and expectations of positive outcomes from the upcoming US–Russia summit.