UPDATE: Wall Street’s major indexes have plunged in early trading today, reacting to alarming news from the Labor Department that the Producer Price Index (PPI) soared by 3.3 percent year-over-year in July, exceeding the 2.5 percent forecast by economists. This unexpected rise puts pressure on expectations for Federal Reserve interest rate cuts this year.
The report, released just moments ago, revealed a 0.9 percent increase in producer prices month-over-month, significantly higher than the predicted 0.2 percent gain. Following this news, traders adjusted their expectations for rate cuts, now anticipating a reduction of approximately 58 basis points compared to 63 basis points before the report.
“It’s sending a mixed message about the economy,” stated Peter Andersen, founder of Andersen Capital Management in Boston. “This wholesale data does show that perhaps there is some inflation working, and we shouldn’t be so quick to conclude that we need to cut interest rates.”
As of 10:30 AM EDT, the Dow Jones Industrial Average has dropped 164.29 points, or 0.37 percent, now sitting at 44,757.98. The S&P 500 lost 16.84 points, or 0.26 percent, down to 6,449.74, while the Nasdaq Composite fell 22.69 points, or 0.10 percent, to 21,690.45.
The latest inflation data comes amid ongoing concerns that U.S. tariffs on imports could further influence prices and potentially hinder a stock market rally that had previously driven the S&P 500 and Nasdaq to record highs in recent sessions.
Today’s market reaction reflects a broader unease among investors. Nine out of the eleven sectors in the S&P 500 reported declines, with materials suffering the most at a drop of 1.2 percent. Rate-sensitive sectors, such as small-caps and housing stocks, also fell more than 1.0 percent each.
In a further twist, separate data revealed that new applications for jobless benefits dropped last week, signaling low layoffs despite the economic uncertainty. Notably, Mary Daly, president of the San Francisco Fed, has cast doubt on the necessity of an aggressive 50-basis-point interest rate cut, countering comments made by Treasury Secretary Scott Bessent just a day earlier.
Market giants are also feeling the pressure. Shares of Cisco Systems slid 1.0 percent following a forecast that failed to excite investors. More drastically, Deere & Co plummeted 8.0 percent after reporting a lower quarterly profit and tightening its annual profit forecast. Similarly, Tapestry crashed 17.6 percent after issuing a lower annual profit outlook, attributing some of their woes to tariffs.
As investors brace for further volatility, attention will shift to upcoming remarks from Alberto Musalem, president of the St. Louis Fed and a voting member of the Federal Open Market Committee, later today.
Currently, declining stocks are outpacing advancing ones at a rate of 5.05-to-1 on the NYSE and 3.38-to-1 on the Nasdaq. The S&P 500 has reported four new 52-week highs but also noted no new lows, while the Nasdaq has seen 24 new highs against 31 new lows.
Stay tuned for more updates as this story develops and impacts the financial landscape.
