U.S. stock index futures edged lower Thursday morning, hinting at a pullback after two straight days of gains, as investors digested a hotter-than-expected wholesale inflation report.
The latest data from the Labor Department showed producer prices in July climbed sharply, with the Producer Price Index (PPI) for final demand rising 0.9% month-over-month, following a flat reading in June. Economists had anticipated a far smaller 0.2% increase.
On an annual basis, producer price growth accelerated to 3.3% from June’s upwardly revised 2.4%. Market forecasts were looking for a more modest uptick to 2.5% from the previously reported 2.3%.
The surprise jump in wholesale inflation tempered the optimism sparked earlier in the week by consumer price data that reinforced expectations of a September rate cut by the Federal Reserve. Even so, CME Group’s FedWatch tool still assigns a 94.6% probability that the central bank will trim rates by a quarter percentage point next month.
On Wednesday, equities initially extended Tuesday’s rally before paring gains. The Nasdaq added 31.24 points, or 0.1%, to 21,713.14, while the S&P 500 climbed 20.82 points, or 0.3%, to a fresh record close of 6,466.58. The Dow Jones Industrial Average outperformed with a 463.66-point jump, 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).
The week’s earlier gains were fueled by rate-cut hopes after consumer inflation numbers largely matched forecasts. Treasury Secretary Scott Bessent has urged the Fed to keep the option open for a bigger 50-basis-point reduction, pointing to recent softness in the labor market. President Donald Trump has also kept up public pressure on Fed Chair Jerome Powell, even threatening to let a “major lawsuit” tied to headquarters renovations proceed.
Sector-wise, housing stocks led the market Wednesday, with the Philadelphia Housing Sector Index up 3.7%, its best close in eight months. Biotech names also rallied, lifting the NYSE Arca Biotechnology Index 3% to a five-month high. Airline, pharmaceutical, and computer hardware stocks posted notable gains, while brokerage and software shares lagged.
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