Today's producer price index and jobless claims data may not do much to lower the volume on calls for multiple near-term Federal Reserve rate cuts, with the Trump administration leading the way. The S&P 500 fell modestly after the data, following Wednesday's close at a new record high. Deere is among the big S&P 500 losers early Thursday amid a tempered earnings outlook as it navigates Trump tariffs.
After Tuesday's consumer price index data showed a modest impact from tariffs on goods prices in July, new PPI data showed a surprising jump, but it may not feed through to the Fed's primary inflation rate, the core PCE price index. Meanwhile, weekly initial jobless claims dipped. Continuing jobless claims, those people still collecting benefits because they haven't found new jobs, eased from the prior week's nearly four-year high.
9:39 a.m. ET
S&P 500 Opens Lower
The S&P 500 slipped 0.3% in Thursday morning stock market action shortly after the open, following Wednesday's record closing high.
The S&P 500 finished Wednesday up 1.1% on the session and 9.6% year to date.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
9:29 a.m. ET
Hot PPI Won't Blow Up Key Fed Inflation Rate
Despite a 0.9% rise in core producer prices, the Fed's primary inflation rate, the core PCE price index, may only rise 0.26% in July, wrote Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
Tame readings for health care services prices and domestic airline passenger services provide welcome inflation news.
Further, he says that portfolio management costs likely added 0.1% to the monthly increase in the core PCE price index. That may leave an increase of less than 0.2% in core market-based prices, which is what the Fed really cares about.
That doesn't mean the threat of tariff-fueled inflation has been averted, just that it hasn't hit very hard yet, Tombs says
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9:15 a.m. ET
Portfolio Management Costs Surge
The S&P 500 rally has a downside for inflation: surging portfolio management costs. Those costs surged 5.8% in July. Yet while portfolio costs are part of the core PCE price index, Fed Chairman Jerome Powell has said that policymakers are more concerned with market-based prices.
That's among the reasons the hot PPI probably isn't a huge deal for Fed policy.
9:09 a.m. ET
Fed Rate-Cut Odds Ease
Amid the big overshoot for the PPI, markets are now pricing in 94.5% odds of a Federal Reserve rate cut at the Sept. 17 meeting, down from 100% ahead of the data, according to CME Group's FedWatch tool.
Markets had seen slim 2% odds of a 50-basis-point cut next month, but that was erased by the PPI.
For the full year, markets now see 48% odds of 75 basis points in rate cuts, down from 57% ahead of the data.
8:53 a.m. ET
S&P 500 Futures Slip
S&P 500 futures were flat ahead of the data, then slipped a moderate 0.3%. The PPI data may look worse than it is, given that much of the inflation came in services and distributor margins.
8:45 a.m. ET
Jobless Claims
New claims for jobless benefits dipped to 224,000 from a revised 227,000. Continuing claims for benefits eased to 1.953 million in the week through Aug. 2 from a downwardly revised 1.968 million the prior week, which was still the highest level since November 2021.
8:45 a.m. ET
PPI Goods Prices Rise
Goods prices rose 0.7%, the most since January. The Bureau of Labor Statistics said 40% of the increase came from food prices, which rose 1.4% on the month.
8:42 a.m. ET
Wholesale Margins Jump
The PPI data included a curveball. Economists expected that wholesalers "ate" some of the price increases from tariffs, which would have depressed margins for distributors. Instead, those margins jumped 2%.
8:40 a.m. ET
PPI Jumps
Producer prices for final demand rose 0.9% in July vs. 0.2% expectations. The 12-month PPI inflation rate unexpectedly jumped to 3.3% from 2.4% in June.
