Effects of Hotter-Than-Expected Producer Prices
The S&P 500 and Nasdaq fell on Friday as rate-sensitive mega cap growth stocks declined after hotter-than-expected producer prices data for July sent U.S. bond yields higher. U.S. producer price index (PPI) climbed 0.8% in the 12 months leading to July, up from a 0.2% rise in the previous month, as costs of services increased.
Market Expectations and Reactions
Though traders broadly expect the Federal Reserve to not tighten credit conditions for the remainder of the year, bets for no rate hike in September slipped. "The PPI data shows that the inflation monster is still lingering but investors can see progress in the things that come under CPI," said David Russell of TradeStation.
Impact on Treasury Yield and Tech Stocks
The yield on the 2-year treasury note climbed to 4.88%, pressuring rate-sensitive technology and growth names. Tesla, Nvidia, and Microsoft lost between 1.0% and 3.1%, reflecting the broader trend of megacap growth and technology stocks declining.
Market Trends and Previous Session Overview
Benchmark U.S. indexes finished marginally higher in the previous session amid worries about the U.S. economy's longer-term prospects. The drop in mega-cap growth and technology stocks have put the Nasdaq and the S&P 500 on track to end lower for a second straight week.
Current Market Conditions and Consumer Sentiment
At a glance of the market during midday, the Dow Jones Industrial Average was slightly up while the S&P 500 and Nasdaq were down. Meanwhile, U.S. consumer sentiment dipped in August, yet optimism that inflation will edge lower over the next year prevailed.
Sector Rotations and Noteworthy Movers
Keeping the Dow afloat, the healthcare and energy sectors advanced. "The market is seeing some healthy rotation," Russell added. News Corp rose 3.3% after beating quarterly profit estimates, while U.S.-listed shares of Chinese companies Alibaba and JD.com fell due to Beijing's latest stimulus measures.
Market Statistics and Records
Declining issues outnumbered advancers on both the NYSE and Nasdaq. The S&P index recorded new highs and lows, as did the Nasdaq, indicating a mixed performance across the market.