Wall St little changed after in-line monthly producer prices; Powell speech awaited

By Lisa Pauline Mattackal and Purvi Agarwal

(Reuters) -Wall Street’s main indexes were subdued on Thursday after monthly producer prices rose as expected, with investors awaiting Fed Chair Jerome Powell’s comments later in the day for clues on the outlook for interest rates.

The producer price index (PPI) for final demand rose 0.2% on a monthly basis in October, in line with forecasts, though the annual rise of 2.4% was a touch higher than expectations.

Meanwhile, jobless claims dropped 4,000 to a seasonally adjusted 217,000 for the week ended Nov. 9, lower than forecast.

“PPI shows inflation is waning but coming down at a gradual pace, and consistent with what Powell mentioned earlier in the month that risks to inflation and the labor market are balanced,” said Terry Sandven, chief equity strategist, U.S. Bank Wealth Management.

Changing inflation expectations are visible in the bond market, where the U.S. 10-year Treasury yield has ticked up to its highest since July.

Traders now expect a 79.1% chance of a 25-basis point reduction at the Federal Reserve’s December meeting, down from 82% prior to the data, according to the CME FedWatch tool.

The Dow Jones Industrial Average fell 14.77 points, or 0.03%, to 43,943.42, the S&P 500 lost 4.30 points, or 0.07%, to 5,981.08, and the Nasdaq Composite lost 10.19 points, or 0.05%, to 19,220.53.

The blue-chip Dow was buoyed by a 7.1% gain in Walt Disney (NYSE:DIS) after the entertainment giant reported quarterly earnings that beat Wall Street’s estimates and offered robust guidance for the coming years.

Consumer discretionary stocks weighed on the S&P 500. EV maker Tesla (NASDAQ:TSLA) declined 2.5%, while Amazon.com (NASDAQ:AMZN) was down 0.7%.

Powell will provide an update on his economic outlook to business leaders in Dallas, a day after some Fed policymakers shifted their attention back to inflation risks as they weighed when, and how fast and far, to cut interest rates.

Fed governor Adriana Kugler said the central bank has made considerable progress in working to achieve its job and inflation goals, while Richmond Fed President Tom Barkin said high union wage settlements and the possibility of coming tariff increases could make Fed officials more cautious about thinking they have won their battle against high inflation.

A post-election rally in equities appeared to be waning, even as focus turned to the potential inflationary pressures from policies under President-elect Donald Trump’s administration.

“There’s been a big move into speculative names since the election, and there’s a bit of a pullback from there into more quality names,” said Eric Clark, portfolio manager, Rational (LON:0FRJ) Dynamic Brands Fund.

Tapestry (NYSE:TPR) gained 13.6% to hit its highest since early 2014, after the Coach parent said it was terminating its $8.5 billion deal for Capri Holdings (NYSE:CPRI) after the deal was blocked by a U.S. judge. Capri’s shares reversed losses and were up 5%.

Remarks from Fed official John Williams are expected later in the day.

Declining issues outnumbered advancers for a 1.12-to-1 ratio on the NYSE and a 1.53-to-1 ratio on the Nasdaq.

The S&P 500 posted 24 new 52-week highs and nine new lows, while the Nasdaq Composite recorded 63 new highs and 138 new lows.