Stock Market Today: Major Indexes Retreat Ahead of Fed Rate Decision on Hot Inflation Data, Rising Oil Prices; Dow Drops 400 Points

Major stock indexes pulled back Wednesday ahead of the Federal Reserve’s decision on interest rates, as wholesale inflation data came in hotter than expected and oil prices turned higher.

The blue-chip Dow Jones Industrial Average, benchmark S&P 500, and tech-heavy Nasdaq declined 0.9%, 0.7%, and 0.7%, respectively, in recent trading, with the Dow shedding 400 points.

The yield on the 10-year Treasury note—which affects interest rates on all sorts of consumer loans—rose to 4.22% from below 4.20% immediately before the Producer Price Index (PPI) data. The PPI and “Core” PPI readings indicated February inflation increased a respective 0.7% and 0.5% from January, when both were expected to have risen 0.3%.

Meanwhile, investors are eagerly anticipating the Federal Reserve’s decision on interest rates at 2 p.m. ET, and a press conference from Fed Chair Jerome Powell at 2:30. The central bank is expected to keep interest rates unchanged amid uncertainty caused by the Iran war, and analysts expect Powell to adopt a wait-and-see tone, as the central bank monitors whether oil market disruptions will be temporary or longer-lasting.

“I will be listening closely to how Chair Powell frames energy prices, whether he treats them as a temporary shock or something that risks bleeding into inflation expectations,” Thornburg Investment Management Head of Fixed Income Christian Hoffmann said in written commentary. “One point that has not received enough attention is the disinflationary impact of high oil prices through weaker demand. Energy is clearly an inflation risk, but it is also a meaningful economic headwind.”

Yesterday, major equities indexes closed higher for a second consecutive session even though oil prices resumed their ascent since the Middle East conflict broke out on Feb. 28 after a one-day pause Monday.  

West Texas Intermediate crude futures, the U.S. oil-price benchmark, had slipped below $92 a barrel early Tuesday but recently were up 2.5% to almost $99 as investors digested headlines from the Middle East, including that Israel claimed it had killed Iran’s intelligence minister. Brent crude futures, the global benchmark, were nearly 5% higher to roughly $109 a barrel after closing at their highest level since August 2022 yesterday.

Gold futures fell 2.7% to around $4,870 an ounce, while silver futures dropped 3.5% to $77 an ounce. The U.S. Dollar Index, which tracks the value of the greenback against a basket of currencies, rose 0.3% to 99.84. Bitcoin was trading around $72,000, down from overnight highs around $74,800.

Shares of most Magnificent Seven tech giants were lower, although Nvidia (NVDA), the world’s most valuable company, ticked higher after closing 0.7% lower yesterday.

Micron Technology (MU) stock was up 0.5% ahead if its quarterly report after the close today. Williams-Sonoma (WSM) jumped 4.5%, Macy’s (M) surged 4%, Jabil (JBL) fell 3.5%, and General Mills (GIS) slipped 1.5% after issuing results before the bell.

By Aaron Rennie