Stock market concludes its day (with investors approaching with caution)
The U.S. stock market started the week in the red, with the tech-heavy Nasdaq and the broader S&P 500 both experiencing losses at the close of the session. The Nasdaq slipped 0.30%, while the S&P 500 lost 0.25%.
One factor that could influence expectations for rate cuts by the Federal Reserve, the U.S. central bank, is the upcoming Consumer Price Index (CPI) and Producer Price Index (PPI) reports. Recent data indicates that the Producer Price Index (PPI) surged unexpectedly in July 2025, with final demand prices jumping 0.9% month-over-month, well above the anticipated 0.2% rise. This marks the largest increase since June 2022.
Core PPI, which excludes volatile food and energy prices, also increased sharply by 0.9%, three times the forecasted 0.3% rise. This suggests mounting price pressures at the wholesale level that could eventually pass through to consumers.
For the Federal Reserve, rising inflation metrics like CPI and PPI typically reduce the likelihood of imminent rate cuts. The Fed's mandate targets inflation control, and stronger-than-expected inflation data can push policymakers to maintain current rates or even consider hikes to prevent overheating.
The PPI increase signals a potential uptick in broader inflationary pressures as wholesale costs increase, which may lead to a similar rise in the Consumer Price Index (CPI) when released. As of mid-August 2025, inflation at the producer level remains elevated, with year-over-year core producer inflation rising to 2.9% after an eleven-month low of 2.6% in June.
The forthcoming CPI data, expected to reflect similar pressures, will be crucial in shaping Fed policy anticipation. The stock market reaction will depend on the degree to which inflation data alters expectations of Fed monetary policy, with potential increased volatility if rate cuts are seen as less likely in the short term.
In a separate development, Nvidia and Advanced Micro Devices fell in the stock market, with Nvidia at $182.15 and Advanced Micro Devices at $172.28. These tech companies, along with some other U.S. microprocessor companies, have agreed to pay 15% of the revenues from the sale of AI chips to China to the U.S. government.
In addition, the Federal Reserve's key interest rates have remained unchanged since December. U.S. President Donald Trump has extended the tariff truce with Beijing by 90 days. Last week, Trump called for the immediate resignation of Intel's CEO due to concerns about possible ties with Chinese companies.
Most analysts believe the Fed will cut rates by 0.25 percentage points at the next monetary policy meeting in September. Adam Sarhan of 50 Park Investments stated that there is some profit-taking after a strong rally. The Dow Jones Industrial Average index fell 0.45% at the close of the session.
Experts are particularly concerned about the labor market following a sharp downward revision to spring employment numbers. Adam Sarhan of 50 Park Investments stated that it's practically impossible for the U.S. to replace China as the global industrial hub. The tariff truce between Beijing and Washington was initially reached in May in Geneva, Switzerland.
What effect might the unexpected surge in the Producer Price Index (PPI) have on the Federal Reserve's rate cut decisions, given that rising inflation metrics typically reduce the likelihood of imminent rate cuts? Moreover, considering the recent decline in the tech-heavy Nasdaq and the broader S&P 500, and the potential for increased volatility in the stock market, how could the upcoming Consumer Price Index (CPI) data influence investing decisions in the stock-market?
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