US stocks slip as hotter-than-expected wholesale inflation tempers rate cut optimism

US stocks slip as hotter-than-expected wholesale inflation tempers rate cut optimism

US stocks fell at the open on Thursday after fresh data showed that wholesale prices rose far more than expected in July, casting some doubt over prospects of an aggressive interest rate cut from the Federal Reserve next month.

The Dow Jones Industrial Average dropped 168 points, or 0.4%, while the S&P 500 shed 0.2% and the Nasdaq Composite slipped 0.1%. The declines came a day after the S&P 500 and Nasdaq closed at record highs, fuelled by hopes of monetary easing following a cooler-than-expected consumer price inflation (CPI) report earlier this week.

However, Thursday’s producer price index (PPI) report disrupted that optimism. Wholesale prices rose 0.9% month-on-month in July, sharply above economists’ expectations of 0.2%, and well above the flat reading in June. Economists often view PPI as a leading indicator for consumer prices.

The surge was largely driven by a spike in “portfolio management” costs and airfare prices. Stripping out these volatile components, the increase would have been closer to forecasts. Despite the hotter print, CME’s FedWatch tool showed markets still pricing in about a 93% chance of a quarter-point rate cut in September, though the odds of a larger half-point move have disappeared.

Tech bellwethers AMD and Nvidia, which have led much of this year’s rally, turned lower after the data. Cisco shares fell 1% despite reporting fourth-quarter earnings that narrowly beat estimates, while Deere tumbled 7% after issuing mixed full-year guidance.

Asian markets end mixed
Asia-Pacific equities closed mixed on Thursday as investors continued to bet on a Fed rate cut next month despite the US inflation surprise.

Australia’s S&P/ASX 200 rose 0.53% to 8,873.80 after touching an intra-day high on upbeat July jobs data. South Korea’s Kospi was nearly flat at 3,225.66, and Hong Kong’s Hang Seng Index fell 0.37% to 25,519.32. Mainland China’s Shanghai Composite dropped 0.46% to 3,666.44.

Japan’s Nikkei 225 slid 1.45% to 42,649.26, while India’s Nifty 50 edged up 0.05% to 24,631.30 and the Sensex gained 0.11%.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.​​​