U.S. stock index futures were under pressure Thursday morning, signaling a pullback after two straight sessions of gains, as investors digested stronger-than-expected wholesale inflation data.
The selling pressure followed a Labor Department report showing U.S. producer prices rose sharply in July. The Producer Price Index (PPI) for final demand jumped 0.9% for the month, after remaining flat in June, far exceeding economists’ expectations for a 0.2% increase.
On an annual basis, producer price growth accelerated to 3.3% in July from a revised 2.4% in June. Economists had been looking for a more modest increase to 2.5% from the previously reported 2.3% in June.
The hotter inflation print dampened some of the optimism that had built earlier in the week following consumer price inflation figures, which had reinforced expectations for a Federal Reserve interest rate cut in September. Still, the CME FedWatch Tool shows markets pricing in a 94.6% probability of a quarter-point reduction next month.
Wednesday’s session saw stocks initially extend Tuesday’s rally before surrendering part of their gains, though the S&P 500 and Nasdaq still managed to notch fresh record closes. The Nasdaq added 31.24 points, or 0.1%, to end at 21,713.14, while the S&P 500 climbed 20.82 points, or 0.3%, to 6,466.58. The Dow Jones Industrial Average outperformed, jumping 463.66 points, or 1.0%, to 44,922.27, boosted by strong moves in UnitedHealth (NYSE:UNH), Nike (NYSE:NKE), Sherwin-Williams (NYSE:SHW), and Merck (NYSE:MRK).
Gains earlier in the week were driven by hopes for monetary easing after consumer price data came in largely as expected. With the Fed widely expected to cut rates by at least 25 basis points in September, Treasury Secretary Scott Bessent has urged policymakers to leave room for a larger, 50-basis-point move, citing recent soft jobs data. President Donald Trump has also continued to publicly push Fed Chair Jerome Powell to ease more aggressively, even threatening to allow a “major lawsuit” over renovations at the Fed’s headquarters to proceed.
Sector-wise, housing stocks stood out Wednesday, with the Philadelphia Housing Sector Index rallying 3.7% to its highest close in eight months. Biotechnology stocks also surged, sending the NYSE Arca Biotechnology Index up 3% to a five-month high. Airlines, pharmaceuticals, and computer hardware names posted notable gains, while brokerage and software stocks lagged.