Stocks Waver After Producer Prices Rise More Than Expected

Stocks wavered after producer-price data came in hotter than expected, disappointing investors who had hoped for signs of easing inflation before the Federal Reserve’s meeting next week.

The S&P 500 was flat on Friday morning, while the Dow Jones Industrial Average lost 0.1%. The technology-focused Nasdaq Composite rose 0.2%.

The producer-price index, which measures what suppliers are charging businesses and other customers, climbed 0.3% in November compared with the previous month, the Labor Department said Friday morning, the same as October’s revised 0.3% increase. Economists surveyed by The Wall Street Journal had expected U.S. supplier prices to increase 0.2% for November.

Investors had been hopeful that the inflation reading would offer evidence that price pressures in the U.S. are abating and would help solidify a smaller interest-rate increase next week. The Fed will make its next interest-rate decision on Wednesday, and the PPI data—combined with consumer-price data Tuesday—are expected to factor heavily into the trajectory of interest rates over the coming months.

Stock futures, which had traded higher throughout the morning, turned lower after the data’s release. Yields on U.S. government bonds rose, also reversing their performance earlier in the day.

In recent days, investors have grown increasingly worried that elevated inflation will force the Fed to keep lifting rates to higher levels than once expected, potentially pushing the U.S. economy into a recession.

“Even though the market sometimes seems to ignore Powell, thinking he’s bluffing, he keeps reiterating that he will put this economy into a recession if he has to,” said Eric Sterner, referring to Fed chairman

Jerome Powell.

Mr. Sterner, chief investment officer at Apollon Wealth Management, said he expects markets could retest their recent lows in the first and second quarter of next year.

“We’re stuck in this rut right now waiting for inflation to normalize and it may take all of next year for that to happen,” he said.

Those concerns about how high interest rates might go—and how they will affect the economy—have led to choppy trading in U.S. stocks recently and interrupted a rally that began in October. All three major U.S. indexes are on pace to end the week with losses, breaking a two-week winning streak. As of Thursday, the S&P 500 had fallen 2.7% for the week.

“The markets are so sensitive to this right now,” said Susannah Streeter, senior investment and markets analyst at

Hargreaves Lansdown.

“Although supersized rate hikes are probably in the rearview mirror, it’s about how long more gradual rate increases will continue for, and that’s why you’ve got these twin evils looming: recession and high inflation. That’s the real concern—that we’ll get a stagflation scenario.” 

The S&P 500 on Thursday snapped a five-day losing streak.



Photo:

BRENDAN MCDERMID/REUTERS

Yields on government bonds rose, with the yield on the benchmark 10-year U.S. Treasury note climbing to 3.525%, from 3.492% Thursday. The yield on the two-year note, which is more sensitive to near-term interest-rate expectations, rose to 4.332%. Yields rise when bond prices fall.

Brent crude, the international benchmark for oil prices, climbed 1.1% to $77 a barrel, on pace to possibly break a six-session losing streak that amounted to its longest since August 2021. Oil prices have slumped recently amid concerns that slowing economic growth will impede demand for fuel. Both Brent and its U.S. counterpart WTI—both of which reached eye-popping heights this year—are now trading lower on a year-to-date basis.

Outsize market moves have followed the release of inflation data in recent months.

“When CPI comes out slightly above or slightly below, you get massive market action,” said Brandon Pizzurro, director of public investments at GuideStone Capital Management. “Those of us that are defensively positioned are either going to really benefit from next Tuesday and Wednesday, or feel some short term pain if this Santa Claus rally is kickstarted.”

In China, major indexes climbed amid a sharp rise in property stocks. Hong Kong’s Hang Seng rose 2.3%. In mainland China, the Shanghai Composite added 0.3%, helping it notch its sixth consecutive week of gains. Japan’s Nikkei 225 gained 1.2%.

In Europe, the pan-continental Stoxx Europe 600 rose 0.4%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Jack Pitcher at jack.pitcher@wsj.com 

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