NEW YORK (AP) — Most stocks are falling on Wall Street Thursday after a disappointing report said inflation was worse last month at the U.S. wholesale level than economists expected.
Three out of every four stocks in the S&P 500 index dropped, though gains for some influential Big Tech companies helped mask the losses. The index at the heart of many 401(k) accounts edged down by 0.1% from its all-time high set the day before.
The Dow Jones Industrial Average was down 79 points, or 0.2%, as of 10:20 a.m. Eastern time, while the Nasdaq composite was shaving less than 0.1% off its record set the day before.
The discouraging inflation report said that prices at the U.S. wholesale level jumped 3.3% last month from a year earlier. That was well above the 2.5% rate that economists had forecast, and it could hint at higher inflation ahead for U.S. shoppers as it makes its way through the system.
The data forced traders to second guess their widespread consensus that the Federal Reserve will deliver some relief next month by cutting interest rates. Lower rates can boost investment prices and the economy by making it cheaper for U.S. households and businesses to borrow to buy houses, cars or equipment, but they also risk worsening inflation.
“This doesn’t slam the door on a September rate cut,” but it may raise some doubt, according to Chris Larkin, managing director, trading and investing, at E-Trade from Morgan Stanley.
Traders now see a 7.5% chance that the Fed may hold rates steady at its next meeting in September, according to data from CME Group. A day earlier, they were betting on a 100% certainty that the Fed would cut its main rate for the first time this year.
Higher interest rates can hurt all kinds of companies by keeping the cost to borrow high. They can particularly hurt smaller companies, which often need to borrow to grow. The Russell 2000 index of smaller U.S. stocks tumbled a market-leading 1.3%.
Thursday’s disappointing data followed an encouraging update earlier in the week on prices at the consumer level. A separate report on Thursday, meanwhile, said fewer U.S. workers applied for unemployment benefits last week. That’s a good sign for workers, indicating that layoffs remain relatively low at a time when job openings have become more difficult to find.
But a solid job market could also give the Fed less reason to cut interest rates in the short term.
The data helped send Treasury yields higher in the bond market. The yield on the 10-year Treasury climbed to 4.26% from 4.20% just before the data reports’ release and from 4.24% late Wednesday.
On Wall Street, Tapestry helped lead the market lower as the company behind the Coach and Kate Spade New York brands feels the pressure of tariffs.
It detailed how much profit it could lose in its upcoming fiscal year because of tariffs and duties, and its forecast for profit fell short of analysts’ expectations even though its forecast for revenue came in above. Its stock fell 15.1%, despite it also reporting a stronger profit for the latest quarter than analysts expected.
Deere fell 6.5% even though the machinery maker likewise delivered a better profit than expected. There, too, the focus was on where profits are heading in the future. It cut the top end of its forecasted range for profit this year and said its customers “remain cautious amid ongoing uncertainty.”
On the winning side of Wall Street was Fossil Group, which jumped 15.4% after the seller of watches and other accessories reported better profit than expected. It also announced a plan to strengthen its finances, while trimming its forecast for how much it expects worldwide net sales to fall this year.
Gains for a few Big Tech stocks also helped to limit Wall Street's losses. Amazon rose 2.3% to add to its gains from the prior day when it announced same-day delivery of fresh groceries in more than 1,000 cities and towns.
Because Amazon is so huge, with a market value of $2.45 trillion, its stock carries much more weight on the S&P 500 than the typical company's.
In stock markets abroad, indexes were mixed across Asia and Europe ahead of a key meeting between U.S. President Donald Trump and Russian President Vladimir Putin on Friday.
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AP Writers Teresa Cerojano and Matt Ott contributed.
