HomeMarketsUS MarketsStocks open lower on strong supplier-level inflation

Stocks open lower on strong supplier-level inflation

Stocks slumped on Thursday as data revealed that supplier costs rose faster than expected last month, fueling fears that the Federal Reserve may need to keep interest rates higher for longer.

The S&P 500 dropped 1.1%, while the Dow Jones Industrial Average declined 0.8%. The Nasdaq Composite, which focuses on technology, fell 1.4%.

According to the Labor Department, the producer-price index, which gauges what suppliers charge companies and other consumers, climbed 0.7% in January from the previous month, the largest jump since last summer. The Wall Street Journal polled economists, who predicted a 0.4% gain.

Investors have recently become confident that the fight against inflation is making significant progress, propelling the US stock market higher into 2023.Nonetheless, Thursday’s PPI report, along with the release of the latest consumer-price index earlier this week, served as a warning that easing pricing pressures will be difficult.

This week has also provided a slew of other economic data points, many of which have helped convince traders that the United States isn’t on the verge of a recession. Consumer spending increased significantly in January, according to retail sales figures released on Wednesday. Nevertheless, jobless-claims data released on Thursday indicated that worker filings for unemployment benefits were generally stable last week, indicating that the labour market remains tight.

The hotter-than-expected data has caused interest rate estimates to shift, according to derivatives pricing. After largely ignoring Fed officials’ statements about how it is still too early to start decreasing interest rates, traders have just lately altered their bets to reflect the central bank’s rate prediction.

According to investors and strategists, this has contributed to the market’s choppiness.

“I think everyone feels lost,” said Viraj Patel, a global macro strategist at Vanda Research in London. While opinions on interest rates and the risk of a recession differ, Mr. Patel believes “nobody wants to put their money where their mouth is.”

Mr. Patel cited investor positioning as proof. Investors have been withdrawing money from US equity mutual and exchange-traded funds in recent weeks, indicating anxiety. Yet, according to a recent study of JPMorgan Chase institutional clients, nearly one-third want to increase their exposure to equities, which are around record lows and down from recent highs.

Government bond rates rose Thursday after the announcement of the PPI data, reversing earlier losses and indicating that investors’ interest-rate expectations are altering. The yield on the benchmark 10-year US Treasury note increased to 3.832% on Thursday, up from 3.806% on Wednesday. The two-year yield, which is more susceptible to short-term interest-rate predictions, increased from 4.625% to 4.644%.

The WSJ Dollar Index, which compares the US dollar to a basket of 16 currencies, rose 0.2%.

In other news, bitcoin witnessed a resurgence of buyers on Thursday after a new Securities and Exchange Commission proposal for the cryptocurrency industry was not as harsh as some investors had anticipated. On Thursday, the digital currency reached its highest intraday level in six months, approaching $2,500. It was last trading at $24,626, up 1.9% from its 5 p.m. ET price on Wednesday.

Additional results are expected Thursday, with businesses such as DraftKings reporting after the market closes.

Abroad, the Stoxx Europe 600 index was nearly flat. Asian indices finished with a mixed bag. The Hang Seng Index in Hong Kong increased 0.8%, while the Shanghai Composite sank 1% in mainland China. The Nikkei 225 in Japan rose 0.7%.

Aryan Jakhar
Aryan Jakhar
Aryan Jakhar is an Indian Journalist with over two years of active working experience. Aryan is currently working as editor-in-chief at BusinessHeadline.in and he is reachable on contact@businessheadline.in
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