The three major stock indexes in New York started lower. Even though the July Producer Price Index (PPI) in the United States exceeded expectations, the decline is limited.
As of 9:55 a.m. local time on the 14th, the Dow Jones Industrial Average on the New York Stock Exchange recorded a drop of 160.78 points (0.36%) to 44,761.49.
The Standard & Poor's (S&P) 500 index fell by 13.49 points (0.21%) to 6,453.09, while the Nasdaq Composite index declined by 19.67 points (0.09%) to 21,693.47.
According to the U.S. Department of Labor, the July PPI surged by 0.9% on a seasonally adjusted basis compared to the previous month. This is the steepest increase since June 2022 at 0.9%. The market expectation of a 0.2% increase was greatly surpassed.
The core PPI, excluding food and energy, also rose by 0.9%, exceeding the market expectation (0.2%). Year-over-year, the overall PPI rose by 3.3%, while the core PPI increased by 3.7%.
With the unexpected surge in the PPI, stock index futures dropped more than 0.5% before the market opened.
However, as it became evident that the recent PPI surge was significantly influenced by rising portfolio management fees and airline ticket prices, the shock to the market is limited.
Portfolio management fees increased by 5.8%, and airline ticket prices rose by 1.0%. The rise in portfolio management costs is attributed to the general upturn in the financial markets. Analysts note that had it not been for the surge in these two items, the discrepancies from expectations would not have been significant.
Nonetheless, the sharp increase in the PPI has raised the perception that tariff-related inflation will eventually be passed on to consumers, which is merely a matter of time.
Clark Geranen, chief market strategist at Calvey Investments, noted, "Corporations will soon start passing on the increased expenses from the surge in PPI to consumers."
The expectation for an interest rate cut in September has retreated following the PPI shock. The possibility of a 50-basis point (big cut) rate decrease in September has been dismissed by the market.
According to the Chicago Mercantile Exchange (CME) FedWatch Tool, the federal funds futures market reflects a 94.5% probability of a 25-basis point rate cut in September. The possibility of a big cut has been eliminated, and the probability of a freeze is reflected at 5.5%.
By sector, all sectors fell except for consumer discretionary and financials. Real estate and materials are down by more than 1%.
Large technology corporations with a market capitalization exceeding $1 trillion, excluding Tesla, are all performing well. Amazon is up by 2.41%.
Bullish, a cryptocurrency exchange company attracting attention after investment from Silicon Valley mogul Peter Thiel, saw its shares jump 19.52% on the second day of trading. On the first day of trading, shares had skyrocketed by 83.78%.
Fashion company Tapestry is seeing its stock fall by more than 15% as its annual performance outlook misses expectations.
Deere & Company, the largest agricultural machinery manufacturer in the U.S., has seen its stock drop by more than 6% after lowering its annual outlook's upper limit, resulting in disappointment among investors.
European stocks are mixed. The Euro Stoxx 50 index is up by 0.66%. The French CAC 40 index is rising by 0.52%, and the German DAX index is up by 0.56%. The UK's FTSE index is slightly lower.
International oil prices are declining. As of 10:05 a.m. today, the price of the nearby September West Texas Intermediate (WTI) crude oil is recorded at $63.51 per barrel, up by 1.37% from the previous session.