The Dow Jones Industrial Average retreated on Thursday, snapping a three-day winning streak. This followed unexpectedly high US inflation data, pushing Treasury yields higher and pressuring Nvidia’s stock.
The 30-stock Dow fell 137.66 points, or 0.35%, to close at 38,905.66. The Nasdaq Composite also dipped 0.3% to 16,128.53, while the S&P 500 slipped 0.29% to 5,150.48. February’s Producer Price Index (PPI), a measure of wholesale inflation, rose 0.6% last month. Core PPI, excluding food and energy, increased 0.3% in February. Economists had forecast a 0.3% rise for headline PPI and a 0.2% increase for core PPI. Stocks initially showed resilience after the report but lost steam after the open.
“The questions now are, will traders rethink how soon the Fed will cut rates, and will that slow down the stock market rally in any meaningful way?” asked Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley. This uncertainty around future Federal Reserve rate cuts contributed to the market’s decline.
The concerning inflation report triggered a rise in bond yields, with the benchmark 10-year Treasury yield climbing roughly 10 basis points to 4.29%. Nvidia shares also suffered, falling for the fourth time in five sessions, down more than 3%. This decline in Nvidia further weighed on the market.
“I think one question is, are yields going to go higher still, and if they do, do we have more downside in the market? I think the answer is yes to both,” said Thierry Wizman, global FX and rates strategist at Macquarie. His analysis highlights the potential for further market declines if bond yields continue rising.
The PPI report represents the final major economic data release before the Federal Reserve’s policy meeting on March 19-20. This meeting will be crucial in determining the future direction of monetary policy and its impact on the stock market. Major tech stocks like Apple and Microsoft saw increased buying on Thursday. Robinhood’s trading platform jumped 5% after reporting a 16% month-over-month increase in assets under custody for February. Conversely, electric vehicle startup Fisker plummeted nearly 52% following a Wall Street Journal report that the company had hired restructuring advisors in preparation for a potential bankruptcy filing.