NEW YORK: Wall Street’s main indexes were mixed in choppy trading on Thursday after higher-than-expected producer prices data kept a smaller 25-basis point rate cut by the Fed firmly on the table, while Moderna 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.
Separately, initial claims for state unemployment benefits stood at 230,000 for the week ended Sept. 7, in line with estimates.
“With PPI basically repeating yesterday’s CPI reading and in-line jobless claims, the decks have been cleared for the Fed to kick off a rate-cutting cycle,” said Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley.
Meanwhile, Moderna’s shares dropped 16.8% to their lowest intraday level since November. They were the biggest decliner on the S&P 500 after the vaccine maker forecast sales between $2.5 billion and $3.5 billion next year, below analysts’ estimates.
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 US 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 Federal Reserve 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.
“The discussion will soon turn to how far and fast the Fed is likely to trim rates over time,” E*TRADE’s Larkin added.
The Dow Jones Industrial Average fell 42.15 points, or 0.13%, to 40,819.56, the S&P 500 gained 10.41 points, or 0.18%, to 5,563.98, and the Nasdaq Composite gained 78.96 points, or 0.43%, to 17,470.76.
Most of the S&P 500 sectors were higher, led by communication services’ 1.2% rise. Energy stocks also rose more than 1%.
The more economically sensitive small-cap Russell 2000 meanwhile outperformed, rising 0.9%.
Among other stocks, Micron Technology dropped 4.2% after a report that Exane BNP Paribas downgraded the chipmaker’s shares to “underperform” from “outperform”.
Kroger gained 6.5% after the supermarket chain beat estimates for second-quarter results and raised the lower end of its annual sales forecast.
Shares of gold miners jumped as spot gold hit a record high, with the Arca Gold BUGS index up more than 5%.