By Stephen Culp
NEW YORK (Reuters) – The Nasdaq and Nasdaq posted their fourth consecutive record high on Thursday and U.S. Treasury yields hit their lowest level since early April, as investors reconciled cooler-than-expected inflation data with tempered interest rate cut expectations from the Federal Reserve. .
The dollar gained ground against a basket of world currencies as the Fed’s hawkish stance and the possibility of a rate war between Europe and China sent European stocks sharply lower.
The blue-chip Dow Jones was modestly lower at the closing bell.
The Labor Ministry data showed that producer prices came in significantly lower than analysts expected, falling 0.2% month-on-month in May while rising 2.2% year-on-year, or 20 basis points above annual Fed inflation target of 2%.
In another report, initial unemployment claims hit a 10-month high.
The data followed Wednesday’s cooler-than-expected CPI report and the Fed’s revised dot plot, which cut interest rate cut expectations this year from three to one.
“After solid gains, markets are taking a bit of a break from yesterday’s big news day and that’s not a bad thing,” said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. “We call this the calm after the storm: we are consolidating some of the really big gains we saw in the first half of June.
Despite the Fed’s aggressive dot plot revision, expectations are growing that the US central bank could implement its first interest rate cut as early as September.
According to CME’s FedWatch tool, financial markets now see a 60.5% probability of a 25 basis point cut in the Fed Funds target rate in September.
“The Fed may be talking a little aggressively, but they also rely on data,” Detrick added. “And with today’s PPI data also showing improvement, the market is assuming that the Fed could change its mildly hawkish tone quite quickly with continued improvement in inflation data.”
The S&P 500 fell 65.17 points, or 0.17%, to 38,647.04, the S&P 500 gained 12.71 points, or 0.23%, to 5,433.74 and added 59.12 points, or 0 .34%, to 17,667.56.
European shares closed sharply lower, pressured by auto stocks, as investors worried about Beijing’s response to the European Union’s new tariffs on electric vehicles imported from China.
The pan-European index lost 1.31% and the MSCI index for shares around the world lost 0.27%.
Emerging market stocks rose 0.64%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.67% higher, but lost 0.40%.
fell after the soft economic figures.
Benchmark 10-year bonds last rose 13/32 in price to yield 4.2442%, up from 4.295% late Wednesday.
The 30-year bond last rose 27/32 in price to yield 4.4%, up from 4.45% late Wednesday.
The rate rose 0.53%, while the euro fell 0.64% to $1.0738.
The Japanese yen weakened 0.22% against the greenback at 157.09 per dollar, while the British pound last traded at $1.2761, down 0.27% on the day.
Oil prices edged higher on a day of up-and-down trading as rising supply and delayed Fed rate cuts were offset by economic data.
rose 0.15% to $78.62 per barrel while settling at $82.75 per barrel, up 0.18% on the day.
Gold prices, unlike the dollar, fell following the weaker-than-expected PPI report.
fell 0.8% to $2,303.15 an ounce.
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