US equity indexes encountered volatility in trading sessions after midday on Thursday as investors assessed a stronger-than-expected reading on wholesale prices alongside an unexpected rise in jobless claims. The S&P 500 experienced a slip of 0.1%, settling at 6,075.8, while the Nasdaq Composite decreased by 0.2% to 20,004.2, and the Dow Jones Industrial Average also fell by 0.2% to 44,064.3.
The energy and materials sectors led the market declines, whereas real estate and consumer staples sectors emerged as notable gainers. In the latest report from the Bureau of Labor Statistics, the US producer price index (PPI) escalated by 0.4% month-over-month in November, which was above the consensus estimate of 0.2% derived from Bloomberg polling.
October's PPI was modified to reflect a 0.3% increase, following an upward revision. Year-over-year analysis showed a 3% increase in producer prices for November, surpassing the expected rise of 2.6% from analysts. The prices of precious metals took a hit, with gold decreasing by 1.7% to $2,710.11 per ounce, while silver saw a sharper decline of 3.8%, pricing at $31.71 per ounce. Stifel Chief Economist Lindsey Piegza noted that the surprisingly high PPI figure reinforces the idea of declining disinflation and emphasizes the necessity for a vigilant monetary policy approach as 2025 approaches.
"While likely insufficient to dissuade the Fed from a third round of cuts next week due to the desire to offer relief before potential budgetary constraints next year, the Fed seems poised for a policy pause sooner rather than later,” Piegza remarked. Despite the PPI figures trending upwards, Matthew Martin, a senior economist at Oxford Economics, stated that the report supports another interest rate cut.
“Goods prices were the main factor behind the positive surprise, with a transient rise in food prices adding upward pressure to the index,” he explained in comments sent to MT Newswires. Initial jobless claims in the US rose to 242,000 for the week ending on December 7, traveling up from a revised figure of 225,000 from the prior week, against expectations which predicted a drop to 220,000, based on a survey compiled by Bloomberg.
The four-week moving average saw an increase of 5,750, now standing at 224,250 after a previous rise. Lead Economist at Oxford Economics, Nancy Vanden Houten, cautioned against drawing conclusions from a single week’s fluctuation in claims, especially considering seasonal factors contributing to data volatility during this time of year.
“Continued claims remain elevated in states affected by recent layoffs or those hit hard by the hurricanes earlier this fall,” Vanden Houten stated. She further affirmed that the claims data did not present obstacles for a rate cut next week, asserting, “Although the labor market seems generally healthy, some areas are experiencing softness, and the Fed is cautious about allowing that to evolve into a more significant downturn.” According to the FedWatch tool from CME Group, there was a remarkable 98% probability of a quarter-point interest rate cut by the following week, remaining unchanged from the previous day.
Observers noted that a year from now, the most likely scenario suggests rates will settle between 3.75% and 4%, closely aligning with the current range of 4.5% to 4.75%, indicating a cautious easing process scheduled for 2025. Amid the uncertainty, US Treasury yields fluctuated; the yield on 10-year bonds increased by 3.1 basis points to reach 4.3%, whereas the two-year yield rose by 1.3 basis points to hit 4.17%.
Yields on bonds maturing in less than one year had declined. In commodity markets, West Texas Intermediate crude oil futures saw a modest gain of 0.1%, reaching $70.35 per barrel, reversing earlier losses..