The Dow Jones Industrial Average retreated on Thursday, ending a three-day winning streak. This decline followed the release of unexpectedly high U.S. inflation data, which led to a surge in Treasury yields and put pressure on Nvidia’s stock.
The 30-stock Dow fell 137.66 points, a 0.35% decrease, closing at 38,905.66. The Nasdaq Composite also experienced a dip, falling 0.3% to 16,128.53, while the S&P 500 slipped 0.29%, finishing the session at 5,150.48. February’s Producer Price Index (PPI), a measure of wholesale inflation, rose by 0.6% last month. Core PPI, which excludes food and energy prices, increased by 0.3% in February. Economists had projected a 0.3% rise for headline PPI and a 0.2% increase for core PPI. Initially, stocks showed resilience after the report, but soon lost momentum after the market opened.
“The questions now are, will traders rethink how soon the Fed will cuts rates, and will that slow down the stock market rally in any meaningful way?” questioned Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley. This uncertainty surrounding 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 increasing by approximately 10 basis points to 4.29%. Nvidia shares also suffered, declining for the fourth time in five sessions, with a drop of more than 3%. This decline in Nvidia’s stock price further contributed to the overall market downturn.
“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,” stated Thierry Wizman, global FX and rates strategist at Macquarie. His analysis highlights the potential for further market declines if bond yields continue to rise.
The PPI report represents the final significant economic data release before the Federal Reserve’s upcoming policy meeting scheduled for March 19-20. This meeting will be crucial in determining the future direction of monetary policy and its impact on the stock market. Major technology stocks like Apple and Microsoft saw increased buying activity on Thursday. Robinhood’s trading platform experienced a 5% surge 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 indicating the company had engaged restructuring advisors in preparation for a potential bankruptcy filing.
