Strong Producer Price Data Weighs on Equities Ahead of Fed Meeting Next Week

Last Updated: Friday, December 9, 2022 4:31 PM | MT Newswires

US benchmark indices closed lower on Friday after producer prices increased more than expected in November ahead of a potential downshift in the Federal Reserve's tightening campaign next week.

The Dow Jones Industrial Average fell 0.9% to 33,476.5, while the Nasdaq Composite and the S&P 500 lost 0.7% each to close at 11,004.6 and 3,934.4, respectively. Barring communication services, all sectors posted losses, led by energy, health, and materials.

For the week, the Dow declined 2.2%, the S&P 500 fell 2.8%, while the Nasdaq lost 3.4%.

In economic news, the producer price index rose 0.3% for a third month in a row but higher than market expectations for a 0.2% gain. PPI advanced 7.4% annually, down from October's 8.1% advance, but above the consensus for a 7.2% rise.

The larger-than-expected increase reinforces the notion that there is still more work to be done before the Fed has clearly reinstated price stability, Stifel said in a note.

The next Federal Open Market Committee meeting is scheduled for Dec. 13 and Dec. 14. Markets are currently pricing in a roughly 77% chance that the Fed will slow its next rate rise to 50 basis points, with a 23% chance for another 75-point hike as the central bank continues its fight against inflation, according to the CME FedWatch Tool.

US consumer confidence unexpectedly rose so far in December as year-ahead inflation expectations improved, according to preliminary data released by the University of Michigan's Surveys of Consumers. The consumer sentiment index was 59.1 this month, up 4% from 56.8 in November. The reading topped the Econoday consensus calling for a flat print.

The US 10-year yield jumped 10 basis points to 3.59%, while the two-year rate moved up 3.4 basis points to 4.34%.

In company news, Lululemon Athletica (LULU) shares fell nearly 13%, the worst performer on the Nasdaq. The athletic apparel retailer reported better-than-expected fiscal Q3 results that were overshadowed by "less-than-ideal" inventory and gross margin dynamics, Wedbush Securities said in note.

DocuSign (DOCU) was the top gainer on the Nasdaq, up 12%, after the company moderately raised its sales forecast for fiscal 2023 after reporting a Q3 beat as a restructuring program announced in September helped underpin its operating margin.

West Texas Intermediate crude oil futures were little changed at $71.44 per barrel.

Gold rose 0.3% to $1,807.3 per troy ounce, while silver increased 1.7% to $23.65 per ounce.

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