Wall Street slides as hot producer price data crimps rate cut bets

What an interesting chart we have today, it’s like the market was having a nervous breakdown, all the indexes starting the day deeply in the red and then bouncing back and forth like a yoyo. At least by 2:30, all was close to break-even, then at exactly 2:40, all three dropped like a rock. It must have been at exactly 2:40 that the PPI report came out. Just as yesterday’s retail sales showing an unexpected drop that stimulated buying, the PPI today showed an unexpected rise that provoked more panic selling. Yesterday there was renewed hope for a May rate cut. Today that is back to June, and even June is now in question as the Fed narrative remains at “higher for longer.” There was also no encouragement from two Fed presidents with both Atlanta and San Francisco issuing statements that “there is more work to do.” Volume was just a little below average at 11.18 billion. 

Wall Street slides as hot producer price data crimps rate cut bets

By Carolina Mandl, Amruta Khandekar and Ankika Biswas

Fri February 16, 2024 4:21 PM

DJ: 38,773.12  +348.85        NAS: 15,906.17  +47.03        S&P: 5,029.73  +29.11     2/15

DJ: 38,627.99  -145.13         NAS: 15,775.65  -130.52       S&P: 5,005.57  -24.16      2/16

Feb 16 (Reuters) - U.S. stocks fell on Friday with the Nasdaq showing the largest decline after a hotter-than-expected producer prices report eroded hopes for imminent interest rate cuts by the Federal Reserve.  A Labor Department report showed producer prices increased more than expected in January, feeding fears inflation was picking up after months of cooling. After five consecutive weeks of gains, all three indexes posted a weekly decline. 

The data could encourage the Fed to wait before cutting rates. Earlier this week, a hot consumer prices report sparked a selloff in equity markets although a slump in January retail sales on Thursday stoked hopes of rate cuts.  "The inflation data this week are definitely going to keep the Fed at least on pause until summer," said Carol Schleif, chief investment officer at BMO family office. "Data is bumpy, it's not a straight line."  Treasury yields spiked after the report as traders added to bets the Fed may defer the first rate cut until after June.  "The theme of higher for longer is really the continuing market narrative" for interest rates, said Greg Bassuk, Chief Executive Officer at AXS Investments.

Two Fed officials expressed caution. Atlanta Fed President Raphael Bostic said he needed more evidence inflation pressures are easing, but is open to lowering rates at some point in the next few months. San Francisco Fed President Mary Daly said "there is more work to do" to ensure stable prices, despite remarkable progress.

The S&P 500 (.SPX), opens new tab lost 24.18 points, or 0.49%, to end at 5,005.15 points, while the Nasdaq Composite (.IXIC), opens new tab lost 132.38 points, or 0.83%, to 15,775.65. The Dow Jones Industrial Average (.DJI), opens new tab fell 149.48 points, or 0.39%, to 38,623.64.

Most megacap stocks dropped, with Meta Platforms (META.O), opens new tab falling 2.2% and dragging the S&P 500 communication services (.SPLRCL), opens new tab index down 1.56%.  The S&P 500 closed above 5,000 for the fourth time this year thanks to robust corporate earnings and surging enthusiasm around artificial intelligence.

Applied Materials (AMAT.O), opens new tab jumped 6.4% after the semiconductor equipment supplier forecast better-than-expected second-quarter revenue on strong demand for advanced chips used in AI.  Vulcan Materials (VMC.N), opens new tab gained 5,2% after forecasting a higher full-year profit, aiding a rise in the S&P 500 materials sector index (.SPLRCM), opens new tab.  Roku (ROKU.O), opens new tab slumped 23.8% after forecasting a bigger first-quarter loss, while crypto exchange Coinbase Global (COIN.O), opens new tab jumped 8.8% on posting its first quarterly profit since 2021.  DoorDash (DASH.O), opens new tab dropped 8.1% as the delivery firm forecast a quarterly profitability metric below expectations, hurt by higher labor costs.

Declining issues outnumbered advancers by a 1.7-to-1 ratio on the NYSE, while on Nasdaq declining issues outnumbered advancers by a 1.6-to-1 ratio.  The S&P 500 posted 63 new 52-week highs and 3 new lows while the Nasdaq recorded 225 new highs and 66 new lows.

On U.S. exchanges 11.18 billion shares changed hands compared with the 11.65 billion moving average for the last 20 sessions.