Wall Street's main indexes were flat on Friday after a higher-than-expected producer prices report dashed market expectations of imminent interest rate cuts by the U.S. Federal Reserve.
Producer prices jump more than expected in January
A Labor Department report showed producer prices rose more than expected in January amid strong increases in costs of services, raising concerns that inflation was heating up after months of easing. The producer price index for final demand increased 0.7% last month, the biggest gain since October 2018, after rising 0.3% in December. In the 12 months through January, the PPI surged 3.6%, the most since September 2018.
The report gave Fed policymakers more evidence for their cautious approach to cutting rates after a hot consumer prices report triggered a selloff in equity markets earlier this week. A drop in January retail sales did offer some comfort on Thursday.
Treasury yields soar, stocks trade sideways
Treasury yields soared after the report, with the yield on the benchmark 10-year note last at 4.297%, as traders added to bets that the Fed may delay the first rate cut until after June. Two Fed officials set the tone for prudent policymaking moves.
Atlanta Fed President Raphael Bostic said more data is needed to persuade him inflation pressures are truly easing, but he is open to lowering rates at some point in the next few months. Federal Reserve Bank of San Francisco President Mary Daly said on Friday that "there is more work to do" to ensure stable prices, despite remarkable progress.
Most megacap stocks fell, with Meta Platforms dropping 1.8% and dragging the S&P 500 communication services index down 1.1%. The tech-heavy Nasdaq is set to break a five-week winning streak, while the benchmark S&P 500 also lost some momentum this week after jumping more than 5% so far this year. Strong corporate earnings and a surge in enthusiasm around the potential for artificial intelligence has helped the S&P 500 close above the 5,000-point mark for the fourth time this year.
Coinbase surges, Roku slides on earnings
Among individual stocks, Coinbase Global Inc jumped 13.3% after the cryptocurrency exchange posted its first quarterly profit in two years, beating analysts' estimates, as trading volumes skyrocketed amid a rally in bitcoin and other digital assets.
Roku Inc slid 9.8% after the streaming device maker forecast a larger-than-expected first-quarter loss, despite reporting better-than-expected fourth-quarter revenue and profit, as it ramps up spending to attract more users and advertisers.
At 11:47 a.m. ET, the Dow Jones Industrial Average was down 0.37% at 38,627.99 points, while the S&P 500 was flat at 5,005.57. The Nasdaq Composite was down 0.48% at 15,271.23.
The S&P 500 posted 28 new 52-week highs and no new lows; the Nasdaq Composite recorded 97 new highs and 25 new lows.