Stocks in the United States weakened at the end of the week. They headed down after the report on January producer price growth, which was larger than expected. This thwarted market speculation that the US Federal Reserve (Fed) could soon cut its benchmark interest rate. On the foreign exchange market, the dollar initially strengthened but then stagnated.
Market Indices Performance
The Dow Jones index, which includes the shares of thirty leading US companies, fell 0.37 per cent today to end trading at 38,627.99 points. The broader S&P 500 index fell 0.48 per cent to 5,005.57 points and the Nasdaq Composite index, which includes many companies in the high-tech sector, shed 0.82 per cent to 15,775.65 points.
For the week, the Dow Jones lost 0.11 percent, the S&P 0.42 percent and the Nasdaq 1.34 percent. All three indexes weakened after five weeks of gains.
Unexpected Rise in Producer Prices
The U.S. producer price index (PPI) rose 0.3 percent last month from December, the biggest increase since August 2023. Economists polled by Reuters had forecast the PPI to rise 0.1 percent. Costs in the service sector in particular increased.
The Labor Department report reinforced fears that inflation was rising again after months of slowing. The report may then further reassure Fed officials of their wait-and-see approach on rate cuts. The argument against a cut has already been made this week by January’s consumer price growth data.
“Investors got their second inflation surprise of the week. The theme of higher rates for a longer period of time really remains what the market lives by,” said analyst Greg Bassuk of AXS Investments.
Impact on Fed Policy
The above-expectation high growth in US producer prices gives credence to those who believe that the Fed will delay the start of the interest rate cut cycle until mid-year or even later. This strengthens the dollar, which would thus benefit from high rates for longer.
The dollar index, which measures the value of the dollar against six major world currencies, was almost unchanged at 104.29 points shortly before 10 p.m. EDT. But it was on track to record a fifth straight week of gains. The euro gained 0.05 percent against the dollar to $1.0777, but the dollar strengthened 0.2 percent against the Japanese yen to JPY150.23.
Source: čtk
