Highlights
Stocks recovered from initial losses to end flat Thursday as traders bought the dip spurred by a worrisome inflation report. The Dow Jones industrial average, the S&P 500, and the Nasdaq all ended flat. US Treasury yields, the dollar and oil prices all rose.
An unexpected 0.9 percent jump in producer prices for July, rather than the modest 0.2 percemt expected, sent bond yields rising and undercut risk appetite and stocks in early trading. The number suggested inflation and tariff effects were worse than the market understood. But traders chose to downplay the report as analysts suggested the Federal Reserve was unlikely to react to a single bad number.
The market came into the PPI-FD report increasingly anticipating 25 basis point rate cuts from the Fed in September, October and December, and Treasury Secretary Scott Bessent's call for a 50 basis point rate cut in September raised that prospect too, at least for discussion. San Francisco Fed President Mary Daly pushed back on Bessent's suggestion on Thursday, telling the Wall Street Journal the Fed would not want to send the signal of urgency that 50 basis points would indicate. Other officials on Wednesday said they were not convinced any rate cut was appropriate yet given the economy's resilience and inflation worries.
Among sectors, best performers included big banks, credit cards, pharma, and entertainment, with a boost from big technology, especially Amazon. Lagging were homebuilders, apparel, machinery, metals, and cosmetics.
An unexpected 0.9 percent jump in producer prices for July, rather than the modest 0.2 percemt expected, sent bond yields rising and undercut risk appetite and stocks in early trading. The number suggested inflation and tariff effects were worse than the market understood. But traders chose to downplay the report as analysts suggested the Federal Reserve was unlikely to react to a single bad number.
The market came into the PPI-FD report increasingly anticipating 25 basis point rate cuts from the Fed in September, October and December, and Treasury Secretary Scott Bessent's call for a 50 basis point rate cut in September raised that prospect too, at least for discussion. San Francisco Fed President Mary Daly pushed back on Bessent's suggestion on Thursday, telling the Wall Street Journal the Fed would not want to send the signal of urgency that 50 basis points would indicate. Other officials on Wednesday said they were not convinced any rate cut was appropriate yet given the economy's resilience and inflation worries.
Among sectors, best performers included big banks, credit cards, pharma, and entertainment, with a boost from big technology, especially Amazon. Lagging were homebuilders, apparel, machinery, metals, and cosmetics.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
