Stocks Move Lower on PPI Data
By Nat Worden
TheStreet.com Staff Reporter
6/17/2004 10:23 AM EDT
Updated from 9:36 a.m. EDT
Stocks slipped Thursday morning following a higher-than-expected report on producer prices, which may revive inflation concerns ahead of the Fed's meeting in two weeks.
The Dow fell 31 points, or 0.3%, to 10,348; the S&P 500 fell 6 points, or 0.5%, to 1128; while the Nasdaq dropped 18 points, or 0.9%, to 1980. The 10-year Treasury note was down 8/32 to yield 4.75%, while the dollar was lower against the yen and euro.
Overseas markets were little changed, with London's FTSE 100 down 0.1% to 4487 and Germany's Xetra DAX down 0.5% to 3984. In Asia, Japan's Nikkei rose 0.3% to 11,608, while Hong Kong's Hang Seng fell 0.7% to 12,083.
The producer price index, a measure of wholesale prices throughout the economy, was higher than expectations in May, rising 0.8% compared with 0.7% in April. Economists had expected the index to slow to a rate of 0.6%. Meanwhile, the core index, which excludes food and energy prices, also disappointed, gaining 0.3% compared with 0.2% in the previous month.
The news on wholesale prices comes after a tame report on consumer prices Tuesday, coupled with encouraging words from the Fed Chairman Alan Greenspan, soothed recent inflation fears that have pervaded the market. Over the weekend, a series of comments from Fed officials seemed to raise the possibility that the central bank would raise interest rates more aggressively than planned if inflationary pressures in the economy proved strong. Currently, most investors have factored in a 25-basis-point raise in the short-term rates after the upcoming Fed meeting.
Robert Pavlik, portfolio manager at Oaktree Asset Management, said the report raises the inflation alert again to the stock market to some degree, but he thinks that wholesale prices had room to go higher and the numbers don't pose a serious threat.
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