US STOCKS-Wall St slips after hot producer inflation data; Fed in focus

Updates prices throughout, analyst comments

By Johann M Cherian and Utkarsh Hathi

March 18 (Reuters) - Wall Street's main indexes slipped on Wednesday after data showed producer prices rose more than expected in February, prompting investors to price out hopes of a Federal Reserve interest rate cut this year.

The Labor Department said the Producer Price Index rose 3.4% year-on-year, above economists' 2.9% forecast, with prices at risk of accelerating further as the Middle East conflict lifts shipping and oil costs.

Traders now see the central bank lowering borrowing costs by at least 25 basis points in April 2027, compared with December 2026 seen before the report, according to LSEG-compiled data.

"PPI data showed that there were lingering inflation pressures even prior to the surge in oil prices," said Angelo Kourkafas, senior global investment strategist at Edward Jones.

"The energy price spike is complicating the task. There is a risk today that we could see more Fed officials not being comfortable with any rate cuts."

Treasury yields jumped after the data, pressuring S&P 500 sectors offering higher dividends, with healthcare .SPXHC and consumer staples .SPLRCS down over 1%.

The focus will now shift to the Fed's decision due at 2 p.m. ET, with traders expecting benchmark rates to be held steady.

The greater focus will be on Chair Jerome Powell's remarks on how tariffs, higher energy costs triggered by the Middle East crisis, and a weakening job market will influence monetary policy decisions later this year.

Brent crude extended gains and reached near $110 a barrel after an Iranian news agency reported that some facilities belonging to Iran's oil industry in South Pars and Asaluyeh were attacked.

Travel stocks were mixed as investors weighed higher energy costs against forecast raises flagged by Delta DAL.O and American AAL.O in the previous session. Delta slipped 0.3%, while American gained more than 1%.

At 12:00 p.m. ET, the Dow Jones Industrial Average .DJI fell 445.20 points, or 0.95%, to 46,548.06, the S&P 500 .SPX lost 39.86 points, or 0.59%, to 6,676.23 and the Nasdaq Composite .IXIC lost 129.64 points, or 0.58%, to 22,349.89.

The CBOE volatility index .VIX spiked 1.05 points to 23.42. The Middle East conflict has exacerbated volatility in global markets. However, U.S. stocks have been buoyed by a rebound in technology shares and on relief that the U.S. is a net energy exporter.

"We're not reacting in as dire a manner as a lot of people would have expected," said Steve Sosnick, chief market analyst at Interactive Brokers.

"People have gotten conditioned to the idea that geopolitical events of this sort tend to resolve themselves relatively quickly. It's not clear that this one will."

In chip stocks, AMD AMD.O gained 2% after a deal with Samsung Electronics 005930.KS to expand their strategic partnership on memory chip supplies for AI infrastructure. Nvidia NVDA.O rose slightly on securing Beijing's approval to sell its second-most powerful artificial intelligence chips in China.

Micron MU.O gained 1.2% ahead of the chipmaker's earnings later in the day, while SanDisk SNDK.O added 2.8%.

Among others, asset manager Apollo APO.O was up about 3%, while Ares ARES.N gained 2.5%, rebounding from sharp losses in the previous week on private credit quality concerns.

Lululemon LULU.O gained 4% after quarterly results. The yoga-wear maker's founder, Chip Wilson, is in a proxy battle with the company and said lead director David Mussafer's decision to exit the board was "a step in the right direction", but reiterated the need for a "substantial" board refresh.

Department store chain Macy's M.N added 4.6% after saying the hit from import tariffs could ease in the second half of the year.

Declining issues outnumbered advancers by a 2.65-to-1 ratio on the NYSE and by a 2.76-to-1 ratio on the Nasdaq.

The S&P 500 posted 14 new 52-week highs and 13 new lows while the Nasdaq Composite recorded 30 new highs and 174 new lows.

(Reporting by Johann M Cherian and Utkarsh Hathi in Bengaluru; Editing by Anil D'Silva and Maju Samuel)

((johann.mcherian@thomsonreuters.com;))