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Stocks decline, US yields and dollar climb after inflation data – 2024-03-14

NEW YORK, March 14 (Reuters) – U.S. Treasury yields and
the dollar climbed on Thursday, while a gauge of global stocks
fell after a stronger than expected reading on U.S. inflation
cast doubt on the timing and size of interest rate cuts from the
Federal Reserve this year.

The producer price index (PPI) for final demand rose 0.6%
last month, above the 0.3% climb forecast by economists polled
by Reuters, after advancing by an unrevised 0.3% in January, the
Labor Department said.

A reading on consumer inflation earlier this week also
showed some stickiness in inflation.

Other data showed U.S. retail sales rebounded last month
with a 0.6% rise, but were below the 0.8% estimate, while weekly
initial jobless claims fell to 209,000 versus the 218,000

“The slight rebound in retail sales coupled with the bigger
than expected jump in producer prices probably will shift the
Fed’s dot plot to indicate two rate cuts in 2024 instead of
three,” said Brian Jacobsen, chief economist at Annex Wealth
Management in Menomonee Falls, Wisconsin.

“The Fed doesn’t have to be in a hurry to cut and the latest
data will likely encourage them to drag their feet.”

The Dow Jones Industrial Average fell 185.94 points,
or 0.48%, to 38,857.04, the S&P 500 lost 25.95 points, or
0.50%, to 5,139.58, and the Nasdaq Composite lost 76.41
points, or 0.47%, to 16,101.51.

Ahead of a Fed policy meeting next week where a rate cut is
essentially ruled out, the market has trimmed the odds of a cut
at the June meeting, with expectations for a cut of at least 25
basis points at 62.9%, according to CME’s FedWatch Tool, down
from 81.7% a week ago.

The yield on benchmark U.S. 10-year notes jumped
9.6 basis points to 4.288% while the 2-year note
yield, which typically moves in step with interest rate
expectations, rose 6.3 basis points to 4.6872%.

The 10-year yield was on track for its biggest one day
increase since Feb. 13.

MSCI’s gauge of stocks across the globe
fell 3.90 points, or 0.50%, to 771.40, while the STOXX 600
index closed down 0.18% after hitting a third straight
intraday record high. Europe’s broad FTSEurofirst 300 index
shed 3.37 points, or 0.17%.

The Bank of Japan also meets next week. Officials including
Governor Kazuo Ueda have sought to temper expectations of an
imminent shift out of negative interest rates, which has set the
yen on course for its worst weekly performance in a month.

The dollar index gained 0.57% to 103.34, with the
euro down 0.58% at $1.0883.

Against the Japanese yen, the dollar strengthened
0.29% to 148.17. The Japanese currency had briefly firmed
against the U.S. dollar after Jiji news agency reported the Bank
of Japan had started to make arrangements to end its negative
interest rate policy at the March 18-19 meeting.

Investors have been pricing in the chance of a change in
policy this month, particularly after news of big pay hikes from
some of Japan’s biggest companies at this year’s annual wage

In commodities, U.S. crude gained 2.07% to $81.37 a
barrel and Brent rose to $85.45 per barrel, up 1.69% on
the day after the International Energy Agency’s (IEA) latest oil
market report predicted a tighter market in 2024.

(Reporting by Chuck Mikolajczak Editing by Barbara Lewis and
Mark Potter)

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