PrintUS Equity Indexes Slip After Hottest Producer Price Inflation in 3 Years Sends Treasury Yields Higher
BY MT Newswires | TREASURY | 08/14/25 01:44 PM EDT01:44 PM EDT, 08/14/2025 (MT Newswires) -- US equity indexes declined as an acceleration in July's wholesale price inflation rate to the fastest pace in three years helped lift government bond yields, signaling that a rate cut priced in for September may be hawkish.
The Nasdaq was flat at 21,715.2, with the S&P 500 down 0.1% to 6,463.1 and the Dow Jones Industrial Average 0.3% lower at 44,804.6. All sectors except communication services and consumer discretionary fell intraday, with materials and real estate leading the decliners.
Most Treasury yields advanced, with the 10-year yield up 5.3 basis points to 4.29% and the two-year rate climbed 5.6 basis points to 3.74%.
The US Producer Price Index rose 0.9% in July from flat in June, above the 0.2% gain 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%, above the 0.2% increase expected and after a flat reading in the previous month. The gain was the biggest since March 2022, the BLS reported Thursday.
Headline PPI was up 3.3% year-over-year in July, while the core PPI rate accelerated to 3.7% annually, higher than the respective 2.4% and 2.6% June rates.
The PPI report follows the release of July's consumer price inflation data on Tuesday, which showed a month-over-month drop. Analysts noted that businesses have not yet fully passed on tariff-related costs to consumers
PPI trends are "a little difficult to ignore," Jennifer Lee, senior economist at BMO Economics, 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, when the lingering effects of Tuesday's soft CPI were still at play. The remaining 11% likelihood on Thursday was for the fed funds rate to remain unchanged next month, compared with zero probability a day ago of no change in September.
The slim possibility of a 50-basis-point Fed rate cut in September vanished, after showing up for a day in the aftermath of comments from Treasury Secretary Scott Bessent, who told Bloomberg "there's a very good chance of a 50 basis-point rate cut" next month.
"A cursory look at the behavior of markets overnight and this morning suggests that traders today are taking a more subdued view of what US monetary policy may deliver in the next few weeks," Thierry Wizman, global foreign-exchange and rates strategist at Macquarie Group, said in a note. "24 hours ago, by contrast, the talk on the street was of a 'mega' rate cut."
Thursday's subdued tone is "more grounded in reality, we think," Wizman said. "We said yesterday that the Fed is more likely to give us a 'hawkish cut' than a 'dovish cut' at September's FOMC meeting, assuming no radical changes in the direction of data or markets until then."
The ICE US Dollar Index rose 0.5% to 98.28.
Gold futures fell 0.8% to $3,380.5 per ounce, and silver futures dropped 1.5% to $38.01.
West Texas Intermediate crude oil futures jumped 1.8% to $63.79 a barrel.
In company news, Amcor
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