U.S. stocks retreated Friday morning after the latest inflation report due this week came in hotter than anticipated.
The S&P 500 pulled back by 0.5%, and the Nasdaq Composite slid 0.7%. The Dow Jones Industrial Average traded 85 points lower, or 0.3%.
July’s producer price index rose 0.3% from the previous month. Economists polled by Dow Jones expected the report, which is closely followed by the Federal Reserve and market participants, to increase 0.2% month over month.
“The increase in wholesale prices serves as a reminder that the data-dependent Fed isn’t ready to declare victory on its campaign to quell inflation,” said Quincy Krosby, chief global strategist at LPL Financial. “Not surprisingly, today’s report offers the hawkish wing of the Fed more ammunition to advocate for another rate hike before the Fed is convinced it’s reached its terminal rate.”
The report comes a day after July’s consumer price index came in softer than anticipated on a year-over-year basis. Prices climbed 3.2% on an annual basis, less than the consensus estimate of 3.3%. However, the so-called core CPI, which excludes volatile food and energy costs, rose 4.7% from the prior year.
With just Friday left in the trading week, the S&P 500 and the Nasdaq are bound for declines of 0.2% and 1.2%, respectively, on the week. Both are on pace for their second straight losing week — a first for the tech-heavy Nasdaq since the conclusion of a four-week losing streak in December 2022. The Dow is an outlier of the three major averages, on track for a modest gain of 0.3%.