Wall Street Slides as Producer Price Data Dampens Rate Cut Hopes
Stocks Fall on Hotter-Than-Expected Producer Prices Report
U.S. stocks took a hit on Friday, with the Nasdaq experiencing the largest decline, following a producer prices report that surpassed expectations, diminishing hopes for immediate interest rate cuts by the Federal Reserve.
Inflation Concerns Rise After Labor Department Report
The Labor Department’s report revealed a higher-than-anticipated increase in producer prices for January, sparking concerns that inflation may be on the rise after months of cooling. This marked the end of five consecutive weeks of gains, resulting in a weekly decline for all three indexes.
Fed’s Rate Cut Prospects Diminish
The data has raised the likelihood of the Fed holding off on rate cuts. Earlier in the week, a report on consumer prices triggered a market selloff, although a decline in January retail sales on Thursday had fueled hopes for rate cuts.
Market Analysts Weigh In
Carol Schleif, chief investment officer at BMO family office, commented, “The inflation data this week are definitely going to keep the Fed at least on pause until summer. Data is bumpy, it’s not a straight line.”
Treasury yields surged after the report, as traders increased their bets on the Fed postponing the first rate cut until after June.
Implications for Interest Rates
Greg Bassuk, Chief Executive Officer at AXS Investments, noted, “The theme of higher for longer is really the continuing market narrative for interest rates.”
Fed Officials Express Caution
Two Fed officials, Atlanta Fed President Raphael Bostic and San Francisco Fed President Mary Daly, both expressed caution regarding inflation pressures and the need for further evidence before considering rate cuts.
Market Performance
The S&P 500 lost 24.18 points, the Nasdaq Composite lost 132.38 points, and the Dow Jones Industrial Average fell 149.48 points. Megacap stocks, including Meta Platforms, saw declines, while Applied Materials and Vulcan Materials experienced gains.
Stock Specifics
Roku slumped 23.8%, while crypto exchange Coinbase Global jumped 8.8% after posting its first quarterly profit since 2021. DoorDash dropped 8.1% due to lower-than-expected profitability metrics.
Market Activity
On U.S. exchanges, 11.18 billion shares changed hands, compared with the 11.65 billion moving average for the last 20 sessions. The S&P 500 posted 63 new 52-week highs, and the Nasdaq recorded 225 new highs and 66 new lows.
The market remains uncertain as investors await further developments from the Federal Reserve.
