Producer Prices Rise, Adding to Evidence of Persistent Inflation – US Market Wrap

The world’s largest bond market fell after another strong inflation report reinforced bets that the Federal Reserve will not cut interest rates soon, even as some sectors of the economy show signs of slowing.

Treasury yields rose and stocks fell as the data highlighted the Fed’s challenges in achieving the “last mile” of its inflation target. The producer price index, like the consumer price index, indicated an increase in cost pressures. Retail sales, on the other hand, were lower than expected. While it is probably too early to draw any conclusions, the data raised some concerns about the possibility of stagflation.

US 10-year yields rose 10 basis points to 4.29%. Traders reduced their bets on Fed cuts in 2024, with swaps fully pricing the first move in July. The S&P 500 fell to around 5,150 ahead of Friday’s options expiration, which has the potential to increase volatility. Nvidia and Tesla both declined. Homebuilders fell after Lennar’s disappointing forecast. The dollar rose. Oil surpassed $81.