NEW YORK: US main stock indexes slipped on Thursday after unexpectedly strong inflation data and a fall in weekly jobless claims fed into fears that the Federal Reserve will keep raising interest rates to tame high prices.
A Labor Department report showed the highest rise in producer prices in seven months in January as the cost of energy products surged.
It also showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, offering more evidence that the labor market remains tight.
“The PPI was up almost twice the forecast and that is clearly a negative for the market overall,” said David Russell, vice president of Market Intelligence at TradeStation.
“And when you consider how strong the job market is, the expectation is that the Fed may raise rates a few more times and then get to a point when it does not need to raise anymore, but there’s no reason for it to cut (later this year).” After a massive selloff in 2022, the main stock indexes have climbed this year on the back of upbeat earnings and expectations the US central bank will switch to smaller rate hikes.
However, signs of a sturdy US economy and an acceleration in January consumer prices recently raised concerns among traders that the Fed may not hit pause on its hawkish policies anytime soon, with hopes of rate cuts later this year receding.
The Fed is seen pushing the benchmark rate above the 5% mark by May and keeping it above those levels till the year-end.
Meanwhile, Cleveland Fed President Loretta Mester said inflation remains too high and noted that she was open to raising rates by more than what her colleagues wanted at the last monetary policy meeting.
Traders will also scrutinize remarks from other Fed officials, including St. Louis Fed President James Bullard, to assess the central bank’s tone on monetary policy.
At 12:32 p.m. ET, the Dow Jones Industrial Average was down 168.59 points, or 0.49%, at 33,959.46, the S&P 500 was down 19.94 points, or 0.48%, at 4,127.66, and the Nasdaq Composite was down 60.96 points, or 0.50%, at 12,009.64.
Ten of the 11 major S&P 500 sectors posted losses, with technology and communication services leading the declines.
Tesla Inc slid 1% as the EV maker said it was recalling 362,000 US vehicles after the US auto regulator said its Full Self-Driving Beta software may cause a crash.
Cisco Systems Inc rose 6.6% to hit a nine-month high after the network gear maker raised its full-year earnings forecast.
Roku Inc soared 15.8% after it forecast first-quarter revenue above market estimates.
Shopify Inc sank 15% after the Canadian ecommerce company forecast slowing revenue growth for the current quarter despite price hikes and new product launches.
Declining issues outnumbered advancers for a 1.78-to-1 ratio on the NYSE and 1.49-to-1 ratio on the Nasdaq.
The S&P index recorded six new 52-week highs and one new low, while the Nasdaq recorded 61 new highs and 33 new lows.
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