Wall Street muted as indexes pare losses after hotter-than-expected PPI report

[Wall Street in New York City]
JaysonPhotography

U.S. stocks on Thursday pared some losses as hopes of progress on Russia and Ukraine countered a hit to sentiment from a significantly hotter than expected July PPI report.

Market participants are keeping a close eye on a scheduled meeting between U.S. President Donald Trump and Russian leader Vladimir Putin in Alaska on Friday [https://seekingalpha.com/news/4482912-trump-to-meet-putin-in-alaska-next-week-as-zelenskyy-rejects-ceding-ukrainian-territory]. Trump in a Fox News Radio interview appeared to be hopeful about the meeting and expressed belief that Putin would reach an agreement.

The benchmark S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews]) was last +0.1% in late morning trade, while the Nasdaq Composite (COMP:IND [https://seekingalpha.com/symbol/COMP:IND]) was +0.2%, and the Dow (DJI [https://seekingalpha.com/symbol/DJI]) was -0.1%.

Over in the bond market, yields were higher. The 10-year Treasury yield (US10Y [https://seekingalpha.com/symbol/US10Y]) rose 2 basis points to 4.27%, while the 2-year yield (US2Y [https://seekingalpha.com/symbol/US2Y]) jumped [https://seekingalpha.com/news/4485404-us2y-jumps-as-hot-ppi-print-fuels-inflation-concerns-and-puts-fed-rate-path-in-focus] 5 basis points to 3.73%.

The U.S. Producer Price Index rose 0.9% MoM in July, surpassing [https://seekingalpha.com/news/4485311-producer-prices-pop-in-july-easily-topping-expectations] the 0.2% increase expected and June's unrevised flat reading. On a year-over-year basis, wholesale inflation accelerated to +3.3%, well above the +2.5% consensus.

Core PPI also jumped 0.9% sequentially in July, vs. +0.2% consensus and 0% prior (unrevised). The core measure climbed 3.7% YoY in July, vs. +2.9% consensus and +2.6% in the previous month (unrevised).

“The fact that PPI was stronger-than-expected and CPI has been relatively soft suggests that businesses are eating much of the tariff costs instead of passing them onto the consumer. Businesses may soon start to reverse course and start passing these costs to consumers,” said Clark Geranen, chief market strategist at CalBay Investments.

“Jerome Powell's Jackson Hole commentary is so important because the stock market has been gaining steam in recent weeks on expectations of a September rate cut, and investors are hungry for additional validation of this expectation,” Geranen added.

In other economic news, initial jobless claims for the week ended Aug. 9 were -3K to 224K, [https://seekingalpha.com/news/4485318-initial-jobless-claims-drop-slightly-more-than-consensus-in-past-week] vs. 225K consensus and 227K prior (revised from 226K).

“Fed should not cut. Calls for cutting are mostly political. Even they are incoherent ('we have the hottest economy and record stock market but rates too high' ??) Just past week one crypto (ETH [https://seekingalpha.com/symbol/ETH]) currency added ~1% of GDP, but yeah, we need easier money...” said Marko Kolanovic, former chief strategist and co-head of Global Research at J.P. Morgan, via X.com (formerly Twitter).

On the tariff front, Trump said on Wednesday he will be speaking with European Leaders "in a short while" to discuss possible deals.

U.S. stocks advanced to mark new record closes on Wednesday, while the Dow Jones ended just 91.77 points away from its record close, as a rally sparked by heightened expectations for Federal Reserve rate cuts continued.

The economic calendar on Thursday is light, with the Fed balance sheet coming after the close.

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