Stock market today: Stocks wobble as inflation forces rate-cut rethink

Stock market today: Stocks wobble as inflation forces rate-cut rethink

US stocks wobbled on Thursday after a cooler-than-expected reading on producer prices helped soothe investor worries stemmed by Wednesday’s surprise uptick in consumer prices.

The Dow Jones Industrial Average (^DJI) traded below the flatline while the S&P 500 (^GSPC) was little changed, coming off a rout that saw the gauges drop about 1%. The tech-heavy Nasdaq Composite (^IXIC) gained roughly 0.4%.

Meanwhile, the 10-year Treasury yield (^TNX) traded around 4.53% after surging to touch its highest level since November on Wednesday.

The Producer Price Index in March rose 0.2% from the previous month, a lower rate of growth than economists had forecast. Year-over-year growth of 2.1% was also below estimates. However, that annual growth represented the fastest jump in producer prices in nearly a year.

Stocks pulled back and bond yields soared after a hotter-than-expected March CPI report prompted investors to reassess expectations for Federal Reserve policy. The market is now pricing in just two rate cuts in 2024, to come later in the year than foreseen. A handful of analysts believe no cuts or even a hike may be possible, depending on how economic data shape up.

Across the pond, the European Central Bank held rates steady at record highs but gave a clear signal that rate cuts were on the way.

Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards.

Another headwind, rising oil prices, returned to the fore amid growing worries about a potential attack on Israel by Iran forces. Crude futures slipped but stayed near six-month highs, with West Texas Intermediate (CL=F) trading a tad below $86 per barrel, while Brent (BZ=F) stayed above $90.

Against that backdrop, hopes are that first-quarter corporate results can provide momentum to stocks, given limited signs that high borrowing costs are slowing earnings. As reports trickle in, investors are bracing for quarterly updates from some of America’s biggest banks, including JPMorgan (JPM), to usher in the season in earnest on Friday.

Live5 updates

  • Oil retreats despite concerns of escalating tensions in Middle East

    Oil fell on Thursday despite worries of escalating tensions in the Middle East. West Texas Intermediate (CL=F) futures retreated almost 1% to trade below $86 per per barrel while Brent (BZ=F), the International benchmark price, hovered below $90 per barrel.

    On Wednesday crude spiked amid a report that the US and its allies believe an attack on Israeli targets by Iran or its proxies is imminent.

    “Near term, look for the nervous trade to continue as all eyes will be on Iran’s intentions of escalating Geopolitical events and what Israel’s retaliation would possibly be,” Dennis Kissler, senior vice president at BOK Financial wrote in a note to clients on Thursday.

    WTI is up 18% year-to-date, while Brent is up 17% during the same period.

  • Fed’s Williams still expects rate cuts ‘starting this year’ despite ‘bumps along the way’

    Jennifer Schonberger reports:

    New York Fed president John Williams offered some reassurances to investors a day after another hot inflation reading spooked markets, saying it will make sense to cut rates gradually “starting this year” if the economy proceeds as expected.

    “I expect inflation to continue its gradual return to 2 percent, although there will likely be bumps along the way, as we’ve seen in some recent inflation readings,” he said in a new speech delivered Thursday morning.

    He expects the Personal Consumption Expenditures index, which is the Fed’s preferred inflation gauge, to be 2.25 to 2.50% this year “before moving closer to 2% next year.” The central bank’s goal is to bring inflation back down to 2%.

    Read more here.

  • Stocks tick higher following wholesale inflation data

    Stocks opened slightly higher on Thursday, reversing earlier pre-market losses after a cooler-than-expected reading on producer prices helped calm concerns of reaccelerating inflation.

    The Dow Jones Industrial Average (^DJI) traded near the flatline while the S&P 500 (^GSPC) gained 0.2% coming off a rout that saw the gauges drop about 1% in the prior session. The tech-heavy Nasdaq Composite (^IXIC) gained 0.5%.

    The Producer Price Index for last month rose 0.2% from the previous month, a lower rate of growth than economists had forecast.

    New York Fed president John Williams offered some reassurances to investors after March’s Consumer Price index spooked markets in the prior session, saying it will make sense to cut rates gradually “starting this year” if the economy proceeds as expected.

    “I expect inflation to continue its gradual return to 2 percent, although there will likely be bumps along the way, as we’ve seen in some recent inflation readings,” he said in a speech on Thursday morning.

  • Amazon shareholder letter read-through to Nvidia

    The last thing Nvidia (NVDA) bulls watching their favorite stock enter correction territory this week want to see is Amazon (AMZN) CEO Andy Jassy’s annual shareholder letter that dropped this morning.

    I found Jassy’s comments on Amazon building its own AI chips very fascinating.

    “To date, virtually all the leading foundation models have been trained on Nvidia chips, and we continue to offer the broadest collection of Nvidia instances of any provider. That said, supply has been scarce and cost remains an issue as customers scale their models and applications. Customers have asked us to push the envelope on price-performance for AI chips, just as we have with Graviton for generalized CPU chips. As a result, we’ve built custom AI training chips (named Trainium) and inference chips (named Inferentia). In 2023, we announced second versions of our Trainium and Inferentia chips, which are both meaningfully more price-performant than their first versions and other alternatives. This past fall, leading foundation model-maker, Anthropic, announced it would use Trainium and Inferentia to build, train, and deploy its future foundation models. We already have several customers using our AI chips, including Anthropic, Airbnb, Hugging Face, Qualtrics, Ricoh, and Snap.

    Jassy’s super long read can be found here.

  • The day after the CPI sell-off

    Yesterday was one of those shock moments in markets.

    We have all lived through worse sessions for stocks and seen more eye-opening economic reports, so it wasn’t shocking in that context. It was just that investors were caught off guard by the inflationary CPI report, and they sold stocks because everyone else was selling and saying to sell.

    Some calm has returned to markets this morning, but futures are still under pressure and nervousness is in the air ahead of the PPI report.

    A new survey of US investors out of JP Morgan also isn’t bolstering sentiment on the Street. You can see below that investor appetite to own stocks has fallen sharply as rate cut hopes have been dialed back.

    Less of an appetite to own stocks here.

    Less of an appetite to own stocks here. (JP Morgan)