US Equity Indexes Decline, Treasury Yields Rise After Hottest Producer Price Inflation in Three Years

12:31 PM EDT, 08/14/2025 (MT Newswires) -- US equity indexes declined while government bond yields increased after July's wholesale price inflation rate rose at the fastest pace in three years, signaling to investors that an interest rate cut next month could be hawkish.

The Nasdaq fell 0.2% to 21,669.1, with the S&P 500 down 0.2% to 6,454.2 and the Dow Jones Industrial Average 0.3% lower at 44,778.3. All sectors except communication services, consumer discretionary and healthcare declined intraday, with materials and real estate leading the decliners.

Most US Treasury yields advanced, with the 10-year yield up 4.1 basis points to 4.28% and the two-year rate climbed 4.5 basis points to 3.73%.

The US Producer Price Index rose 0.9% in July from flat in June, above the 0.2% forecast in a survey compiled by Bloomberg and the largest monthly gain since June 2022, according to the Bureau of Labor Statistics. Excluding the more volatile food and energy prices, core PPI was still up 0.9% from the 0.2% increase expected and unchanged from the previous month. The gain was the biggest since March 2022, the BLA report showed Thursday.

Headline PPI was up 3.3% year-over-year in July, while the core PPI rate accelerated to 3.7% annually, both beating the respective 2.4% and 2.6% June rates.

The PPI report follows Tuesday's data that showed consumer price inflation eased in July on a sequential basis, with analysts saying businesses have yet to fully pass through tariff-related costs.

PPI trends are "a little difficult to ignore," Jennifer Lee, senior economist at BMO, said in a note. "This captures the costs at the producer level, which could theoretically flow through to the consumer, unless producers are willing to eat all of the costs (tariffs), which is doubtful."

The odds of a 25-basis-point cut in September fell to 89% as of Thursday afternoon from 94% the previous day, according to the CME FedWatch Tool, following Tuesday's CPI data. The remaining 12% likelihood on Thursday was for interest rates remaining unchanged next month, compared with zero probability a day ago of rates being left unchanged in September.

The slim possibility of a 50-basis-point Fed rate reduction in September disappeared, after showing up for a day in the aftermath of comments from Treasury Secretary Scott Bessent, who told Bloomberg TV that "there's a very good chance of a 50 basis-point rate cut" next month.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.