Wall Street was little changed on Thursday after hot producer prices data kept a smaller 25-basis point interest rate cut by the Federal Reserve firmly on the table, while vaccine maker Moderna’s shares slumped following a downbeat revenue forecast.
The producer price index (PPI) for final demand rose 0.2% in August, compared with estimates of 0.1% growth. The core number, which strips out volatile food and energy prices, rose 0.3%, higher than the 0.2% forecast.
“Headline PPI inflation came in as expected, but the core rate followed the consumer’s (consumer price index) core rate almost to the tee, a little bit more than expected,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
“If you look at today’s PPI numbers it just confirms the Fed is not going to be as aggressive in cutting rates as the market was expecting.”
Separately, initial claims for state unemployment benefits stood at 230,000 for the week ended Sept. 7, in line with estimates.
Meanwhile, Moderna’s shares dropped 17.8% to their lowest intraday level since November. They were the biggest decliner on the S&P 500 after the company forecast sales between $2.5 billion and $3.5 billion next year, below analysts’ estimates.
Wall Street slips in lead up to inflation data
A string of weakening employment and economic growth data over the past few weeks had led to rising bets on a larger-than-usual 50-bps interest rate reduction from the U.S. central bank, but those expectations have largely faded.
Following Thursday’s data and the inflation report in the previous session, traders now see an 85% chance of the Fed cutting interest rates by 25 bps when it meets on Sept. 17-18, according to CME’s FedWatch Tool. It would be the first rate cut since March 2020.
“Our base case forecast looks for a 25 bps reduction in the federal funds rate at the September FOMC meeting followed by two 50 bps rate cuts at the November and December FOMC meetings,” analysts at Wells Fargo said.
The Dow Jones Industrial Average fell 41.40 points, or 0.10%, to 40,820.31, the S&P 500 gained 0.10 point to 5,554.23, and the Nasdaq Composite gained 24.42 points, or 0.14%, to 17,419.95.
The information technology index pulled back after a 3.2% jump on Wednesday, falling 0.3%, while the healthcare sector also fell 0.3%.
An index tracking semiconductor shares dropped 0.7%, led by a more than 5% fall in Micron Technology after a report that Exane BNP Paribas downgraded the chipmaker’s shares to “underperform” from “outperform.”
The more economically sensitive small-cap Russell 2000 meanwhile outperformed, rising 0.5%.
Among other stocks, Kroger gained 3% after the supermarket chain beat estimates for second-quarter results and raised the lower end of its annual sales forecast.
Chemicals maker Dow slipped 0.7% after lowering its third-quarter revenue forecast due to an unplanned event at one of its plants in Texas.
Advancing issues outnumbered decliners for a 2.01-to-1 ratio on the NYSE and a 1.39-to-1 ratio on the Nasdaq.
The S&P 500 posted 22 new 52-week highs and no new low, while the Nasdaq Composite recorded 35 new highs and 27 new lows.
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