Image Source: Unsplash

The Dow Jones Industrial Average (DJIA) declined on Thursday, ending a two-day bullish run and shedding around 200 points. Equities took a hit after United States (US) Producer Price Index (PPI) inflation rose much faster than expected in July, knocking back bets of three Federal Reserve (Fed) interest rate cuts before the end of the year.

The Dow Jones has fumbled a bullish push to regain the 45,000 major handle, but the major equity index is still trading well into bull country, a full two percent above the 50-day Exponential Moving Average (EMA) near 43,830. Despite fresh weakness on disappointing macro data, the Dow has still managed to claw out nearly 3.8% bottom-to-top from its last swing low.

US PPI rises sharply in July, trims Fed rate cut bets

Core US PPI inflation accelerated to 3.7% YoY in July versus the expected rise to 2.9%, wiping out four months of progress on taming inflation and pushing producer-level price pressures back to where they were when the year started. Headline PPI inflation also rose to a six-month high of 3.3% over the same period, while the previous period saw a slight upside revision to 2.4%.

(Click on image to enlarge)

Interest rate markets are still pricing in over 90% odds of a quarter-point interest rate cut when the Fed makes its next rate call on September 17, but hopes for a new rate-cutting cycle were dashed by Thursday’s sharp increase in business-level inflation. According to the CME’s FedWatch tool, interest rate markets are now pricing in barely even odds of a second interest rate cut in October, and less than 30% odds of a third cut in December.

Dow Jones 5-minute chart

(Click on image to enlarge)

Dow Jones daily chart

(Click on image to enlarge)

More By This Author: