US stocks mostly stalled on Thursday as Wall Street digested a much hotter-than-expected PPI inflation print, souring optimism around a large September rate cut.
The major gauges wavered for much of the session, with the Dow Jones Industrial Average (^DJI) closing down slightly, and the benchmark S&P 500 (^GSPC) rising just above the flatline to notch a third record close in a row. The tech-heavy Nasdaq Composite (^IXIC) closed just below its record high.
July’s Producer Price Index (PPI) came in well above expectations, with month-over-month prices rising 0.9% compared to expectations of 0.2%. On an annual basis, prices rose 3.3%, the most since February. “Core” producer prices, which strip out the cost of food and energy, saw the largest increase in three years.
Euphoria over a possible September rate cut had swept Wall Street over the past two sessions after July’s Consumer Price Index report showed inflation rose as expected, but not dramatically. Traders had fully priced in a rate cut at the Fed’s next meeting, even as some Fed policymakers continue to urge patience.
By Thursday, the vast majority of bets were still on a cut, but nearly 10% of traders were pricing in a rate hold. Meanwhile, bets on a “jumbo” 50-basis-point cut evaporated.
The inflation shock sapped some of the enthusiasm out of a roaring market this week. Stocks extended their rally on Wednesday, pushing the S&P 500 and Nasdaq to consecutive record highs. Bitcoin (BTC-USD) got a boost from mounting rate-cut bets, too, reaching a new record high Wednesday evening before rolling over.
Friday’s retail sales reading will serve as this week’s final key economic data point.
In corporate news, cryptocurrency exchange operator Bullish (BLSH) rose 10% on Thursday, hovering around $75, about double its IPO price of $37.
Intel (INTC) shares jumped 7% after Bloomberg reported that the Trump administration is considering taking a stake in the US chipmaker.