Stocks Fall From Record as PPI Lifts Bond Yields: Markets Wrap

(Bloomberg) — Stocks fell and bond yields rose after stronger-than-anticipated inflation data prompted traders to pare bets on a Federal Reserve rate cut next month.

Following a blistering rally to all-time highs, the S&P 500 retreated. Treasury two-year yields rose five basis points to 3.73%. Money markets showed a 90% chance the Fed will reduce rates in September after fully pricing in the move a day earlier. The dollar advanced.

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US wholesale inflation accelerated in July by the most in three years, suggesting companies are passing along higher import costs related to tariffs.

The producer price index increased 0.9% from a month earlier, the largest advance since consumer inflation peaked in June 2022. The PPI rose 3.3% from a year ago. Services costs increased 1.1% last month — the most since March 2022.

The firm wholesale inflation may give some policymakers pause that price pressures are rearing back up again. Earlier this week, consumer price data pointed to a milder pass-through in July, and the labor market now shifting to a lower gear.

To Chris Zaccarelli at Northlight Asset Management, the spike in PPI shows inflation is coursing through the economy, even if it hasn’t been felt by consumers yet.

“Given how benign the CPI numbers were on Tuesday, this is a most unwelcome surprise to the upside and is likely to unwind some of the optimism of a ‘guaranteed’ rate cut next month,” he said.

“The fact that PPI was stronger-than-expected and CPI has been relatively soft suggests that businesses are eating much of the tariff costs instead of passing them onto the consumer,” said Clark Geranen at CalBay Investments.

The more concerning development for the central bank, as Chicago Fed President Austan Goolsbee noted this week, are signs that services prices might be accelerating, according to Stephen Brown at Capital Economics.

“The PPI suggests inflation isn’t the non-story some people thought it was after Tuesday’s CPI print,” said Chris Larkin at E*Trade from Morgan Stanley. “This doesn’t slam the door on a September rate cut, but based on the market’s initial reaction, the opening may be a little smaller than it was a couple of days ago.”

At BMO Capital Markets, Ian Lyngen said that overall, the data was initially bond bearish, but the move quickly moderated as there wasn’t anything in the details that materially changed investors’ understanding of the state of play in either the real economy or with the Fed.

“From here, there isn’t anything on the horizon that we expect will change the tone in the Treasury market” before tomorrow’s retail sales data, he said.

US Treasury Secretary Scott Bessent said he isn’t calling for a series of interest-rate cuts from the Fed, just pointing out that models suggest a “neutral” rate would be about 1.5 percentage points lower.

“I didn’t tell the Fed what to do,” Bessent said Thursday in an interview on Fox Business, referring to his comments a day before about how the central bank “could go into a series of rate cuts here.”

Corporate Highlights:

Cisco Systems Inc., the largest maker of machines that run computer networks and the internet, gave a cautious forecast for the current fiscal year, even as sales from artificial intelligence projects begin to pick up. Deere & Co., the world’s biggest farm machinery, maker pared its full-year earnings outlook with lower grain prices curbing farmers’ spending. JD.com Inc.’s revenue grew a faster-than-anticipated 22% in the June quarter, benefiting from government-directed consumer subsidies as well as an aggressive drive into new arenas such as meal delivery. Klarna Group Plc had to set aside more money for potentially souring loans in the second quarter, a move that put pressure on profits ahead of its expected public debut. Costco Wholesale Corp. has decided not to dispense the abortion pill mifepristone at its more than 500 pharmacy locations, a decision hailed by a group of faith-based activists who urged the retailer to avoid selling the drug. Tapestry Inc.’s annual outlook for a key profit metric missed analysts’ forecasts due in part to tariffs, a sign that Wall Street is still adjusting to the full cost of duties for US companies. Hon Hai Precision Industry Co. expects sales of servers to more than double this quarter while its consumer electronics business dwindles, underscoring how it’s relying on the AI boom to offset volatile iPhone sales. Some of the main moves in markets:

Stocks

The S&P 500 fell 0.3% as of 9:30 a.m. New York time The Nasdaq 100 fell 0.3% The Dow Jones Industrial Average fell 0.4% The Stoxx Europe 600 rose 0.2% The MSCI World Index fell 0.4% Currencies

The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.4% to $1.1654 The British pound fell 0.3% to $1.3541 The Japanese yen was little changed at 147.27 per dollar Cryptocurrencies

Bitcoin fell 3.8% to $118,339.73 Ether fell 4% to $4,530.81 Bonds

The yield on 10-year Treasuries advanced three basis points to 4.26% Germany’s 10-year yield advanced two basis points to 2.70% Britain’s 10-year yield advanced three basis points to 4.62% The yield on 2-year Treasuries advanced five basis points to 3.73% The yield on 30-year Treasuries advanced one basis point to 4.84% Commodities

West Texas Intermediate crude rose 1.5% to $63.61 a barrel Spot gold fell 0.3% to $3,345.99 an ounce ©2025 Bloomberg L.P.