NEW YORK, Aug 11 (Reuters) - The S&P 500 and Nasdaq finished
in the red while Treasury yields rose as investors digested
signs of cooling U.S. inflation and hopes the Federal Reserve
could slow interest rate hikes against warnings that the battle
with rising prices was far from over.
Thursday's data showed U.S. producer prices (PPI)
unexpectedly fell in July amid a drop in the cost of energy
products. This followed Wednesday's surprise news that consumer
prices (CPI) were unchanged in July due to a drop in gasoline
U.S. Treasury yields rallied after dropping sharply earlier.
Two straight days of slower inflation data gave investors
some hope that soaring prices were finally "peaking and heading
in the right direction," said Joe Saluzzi, co-manager of trading
at Themis Trading in Chatham, New Jersey.
But Saluzzi cautioned that this was a "one month data
"You'd still like to see a trend next month and see it's not
necessarily just energy. You want to see other prices coming
down. It's still early in the game," Saluzzi added.
After adding more than 2% on Wednesday and rising more than
1% to a three-month high earlier on Thursday, the S&P turned red
in afternoon trading and Nasdaq turned negative.
"It was a better CPI print (Wednesday) than expected and a
better PPI print (Thursday) morning than forecasted by analysts.
So it fit that theme, that peak inflation has occurred as energy
continues to decline," said George Catrambone, head of Americas
trading at DWS Group. "But I would be concerned about a head
The Dow Jones Industrial Average rose 27.16 points,
or 0.08%, to 33,336.67, the S&P 500 lost 2.97 points, or
0.07%, to 4,207.27 and the Nasdaq Composite dropped
74.89 points, or 0.58%, to 12,779.91.
The pan-European STOXX 600 index closed up 0.06%
and MSCI's gauge of stocks across the globe
finished up 0.07%.
Robert Phipps, a director at Per Stirling Capital Management
in Austin, Texas, expects the Fed to be cautious about slowing
the tightening cycle until inflation shows more improvement.
"The Fed's learned their lesson. They're not going to take
their foot off the brakes until it's obvious to everybody that
inflation is returning to their 2% target," Phipps said.
San Francisco Fed President Mary Daly, in an interview with
the Financial Times, earlier said that it was far too early for
the central bank to declare victory in its fight against
inflation and that a half-percentage point rate rise in
September was her baseline.
Daly's comments followed similar cautions from Minneapolis
Federal Reserve Bank President Neel Kashkari and Chicago Fed
President Charles Evans on Wednesday.
The dollar, which fell 1% on Wednesday on the prospect of a
more dovish Fed, pared losses on Thursday after likely gaining
some support from the Fed officials' commentary.
In Treasuries, 10-year note yields hit a more
than two-week high as investors in that market bet that the Fed
would press on with rate hikes since inflation, while showing
signs of abating, remained high.
"Even if they're seeing slowing inflation and a slowing of
the economy, they will still hike rates. Why? Because inflation
still has an 8% handle on it. It's still far too high," said
Padhraic Garvey, regional head of research, Americas at ING.
Benchmark 10-year notes last fell 29/32 in price
to yield 2.8839%, from 2.781% late on Wednesday. The 30-year
bond last fell 78/32 in price to yield 3.1716%, from
The dollar index fell 0.114%, with the euro up
0.24% to $1.0322.
The Japanese yen weakened 0.09% versus the greenback at
133.04 per dollar, while Sterling was last trading at
$1.2196, down 0.24% on the day.
In commodities, oil settled higher after the International
Energy Agency raised its oil demand growth forecast for 2022 as
soaring natural gas prices lead some consumers to switch to oil.
U.S. crude settled up 2.6% at $94.34 per barrel and
Brent finished at $99.60, up 2.3% for the day.
Spot gold dropped 0.3% to $1,787.61 an ounce.
(Additional reporting by Herbert Lash, Karen Brettell, Huw
Jones, Sujata Rao, Stella Qiu and Alun John; Editing by Elaine
Hardcastle, Will Dunham, David Holmes and John Stonestreet)