Futures tied to the major U.S. stock indexes moved lower on Wednesday following a Labor Department report that showed producer inflation exceeded economists' expectations for February. The hotter-than-anticipated data prompted investors to pare back bets that the Federal Reserve will lower interest rates this year.
The government report put the Producer Price Index (PPI) at a 3.4% increase on an annual basis for February, above the 2.9% rise economists polled by Reuters had forecast. On a month-to-month basis, the PPI climbed 0.7% in February, outpacing the estimated 0.3% gain.
Removing food and energy - components known for greater volatility - the core PPI advanced 3.9% year over year, versus the 3.7% estimate. Core PPI also rose 0.5% from the prior month, compared with a forecasted 0.3% increase.
The inflation surprise was reflected in futures trading. At 08:36 a.m. ET, Dow E-minis were down 115 points, or 0.24%. S&P 500 E-minis fell 15 points, or 0.22%, while Nasdaq 100 E-minis were lower by 47.25 points, or 0.19%.
Market participants interpreted the stronger PPI readings as weighing on the probability of near-term Fed easing, a shift that was immediately visible in the downside movement of equity futures. The report's data points - both headline and core measures on annual and monthly bases - contributed to that reassessment.
Below is a concise recap of the data and market reaction:
- PPI (February): 3.4% year over year; 0.7% month over month.
- Core PPI (ex food & energy): 3.9% year over year; 0.5% month over month.
- Futures early session moves (08:36 a.m. ET): Dow E-minis down 115 points (-0.24%); S&P 500 E-minis down 15 points (-0.22%); Nasdaq 100 E-minis down 47.25 points (-0.19%).
The report left investors reassessing the timeline for potential Federal Reserve rate reductions, and the immediate response in futures trading signaled a more cautious market stance as the day began.