By Amruta Khandekar and Ankika Biswas
(Reuters) – Wall Street’s main indexes were subdued on Friday after a hotter-than-expected producer prices report pushed back market speculations of imminent interest rate cuts by the U.S. Federal Reserve.
A Labor Department report showed producer prices increased more than expected in January amid strong gains in costs of services, heightening fears that inflation was picking up after months of cooling.
The producer price index data gave Fed policymakers fresh validation for their wait-and-see approach to cut rates after a hot consumer prices report sparked a selloff in equity markets earlier this week, although a slump in January retail sales provided some relief on Thursday.
“The PPI print really confirms the high reading from CPI and really throws some cold water on those that were hoping for cuts sooner rather than later,” said Jeffrey Schulze, director and investment strategist at ClearBridge Investments.
“The earliest time frame for the Fed to potentially embark on a cutting cycle is going to be the June meeting.”
Treasury yields spiked after the report, with the yield on the benchmark 10-year note last at 4.291%, as traders added to bets that the Fed may defer the first rate cut until after June.
Most megacap stocks dropped, with Meta Platforms falling 1.8% and dragging the S&P 500 communication services index down 1.1%.
The tech-heavy Nasdaq is set to snap a five-week winning streak, while the benchmark S&P 500 also lost some steam this week after jumping more than 5% so far this year.
Robust corporate earnings and a surge in enthusiasm around the potential for artificial intelligence has helped the S&P 500 close above the 5,000-point mark for the fourth time this year.
Focus will be on remarks by San Francisco Fed chief Mary Daly during the day after Atlanta Fed President Raphael Bostic noted more data is needed to convince him inflation pressures are truly falling, but he is open to lowering rates at some point in the next few months.
At 11:30 a.m. ET, the Dow Jones Industrial Average was down 31.97 points, or 0.08%, at 38,741.15, the S&P 500 was up 1.65 points, or 0.03%, at 5,031.38, and the Nasdaq Composite was down 19.62 points, or 0.12%, at 15,886.56.
Applied Materials jumped 8.5% to a record high after the semiconductor equipment supplier forecast better-than-expected second-quarter revenue on strong demand for advanced chips used in AI.
Vulcan Materials gained 6.9% after forecasting a higher full-year profit, aiding a 1.1% rise in the S&P 500 materials sector index.
Roku slumped 22.5% after forecasting a bigger first-quarter loss, while crypto exchange Coinbase Global jumped 15.8% on posting its first quarterly profit since 2021.
DoorDash dropped 9.6% as the delivery firm forecast a quarterly profitability metric below expectations, hurt by higher labor costs.
Declining issues outnumbered advancers for a 1.34-to-1 ratio on the NYSE and a 1.36-to-1 ratio on the Nasdaq.
The S&P index recorded 52 new 52-week highs and three new lows, while the Nasdaq recorded 86 new highs and 40 new lows.
(Reporting by Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta and Maju Samuel)
