Dow ends 3-day slump as PPI surpasses expectations

The Dow Jones Industrial Average fell Thursday and snapped a 3-day win streak after the release of hotter-than-expected U.S. inflation data sent Treasury yields higher, while Nvidia shares were under pressure.

The 30-stock Dow pulled back 137.66 points, or 0.35 per cent, to close at 38,905.66. The Nasdaq Composite fell 0.3 per cent to 16,128.53, while the S&P 500 slipped 0.29 per cent to finish the session at 5,150.48.

February’s producer price index, a measure of wholesale inflation, advanced 0.6 per cent last month. Excluding food and energy prices, core PPI climbed 0.3 per cent in February. Economists polled by Dow Jones expected a 0.3 per cent gain for headline PPI and a 0.2 per cent increase for the core reading. Stocks were initially resilient following the report, but lost steam shortly after the open.

The hot inflation report sent bond yields higher, with the benchmark 10-year Treasury adding 10 basis points to 4.29 per cent. Shares of Nvidia were lower for the fourth session in five, pulling back more than 3 per cent.

The PPI report is the last major piece of economic data to be released prior to the Federal Reserve’s upcoming policy meeting, set for March 19-20.

Some analysts believe that if the Fed exercises patience and allows a tighter monetary policy to take effect, further easing in inflation is likely. However, there is a warning that cutting rates too quickly could lead to a resurgence of inflationary pressures. The uncertainty surrounding the timing and pace of rate cuts is evident in both the markets and the Fed's stance.

Investors were buying major technology shares such as Apple and Microsoft on Thursday. Trading platform Robinhood popped 5 per cent after the company reported a 16 per cent increase in assets under custody in February from the prior month. Troubled electric vehicle startup Fisker tumbled nearly 52 per cent after The Wall Street Journal reported that the company has hired restructuring advisors to prepare for a potential bankruptcy filing.

Iron ore prices, influenced by China's economic prospects, neared $US100 per tonne, pressuring higher-cost producers. Weak steel consumption in March led to a further decline, with spot prices reaching US$102.55 per tonne on Thursday. Analysts suggest non-mainstream producers may face losses at $US90 to $US95 per tonne, while major producers might cut back below $US75 to $US80 per tonne, amid ongoing challenges in China's real estate market.

The global decline in lithium prices is causing Chinese producers to reevaluate their production and expansion strategies, with Rystad Energy lowering forecasts for both China and global mined lithium output growth in 2024 due to reduced demand, leading to production shutdowns and job cuts, particularly affecting lepidolite mining and new projects.

Turning to US sectors, only Energy and Communications were the only two sectors that closed higher overnight. Real Estate was the worst performer.

Futures

The SPI futures are pointing to a 0.7 per cent fall.

Currency

One Australian dollar at 8.20am was buying 65.77 US cents.

Commodities

Gold lost 0.66 per cent. Silver fell 0.54 per cent. Copper shed 0.17 per cent. Oil gained 1.93 per cent.

Figures around the globe

European markets closed mixed. London’s FTSE fell 0.37 per cent, Frankfurt lost 0.11 per cent, and Paris closed 0.29 per cent higher.

Turning to Asian markets, Tokyo’s Nikkei added 0.29 per cent, Hong Kong’s Hang Seng fell 0.71 per cent and China’s Shanghai Composite lost 0.18 per cent..

Yesterday, the Australian share market closed 0.20 per cent lower at 7,713.63.

Ex-dividends
Ariadne Australia (ASX:ARA) is paying 0.25 cents fully franked
CAR Group Limited (ASX:CAR) is paying 34.5 cents 50 per cent franked
Duratec (ASX:DUR) is paying 1.5 cents fully franked
Kaizen Global Inv (ASX:KGI) is paying 5 cents fully franked

Dividends payable
Ashley Services Group Ltd (ASX:ASH)
Beacon Lighting Group Ltd (ASX:BLX)
FSA Group Ltd (ASX:FSA)
Jumbo Interactive Ltd (ASX:JIN)
Probiotec Ltd (ASX:PBP)
Schaffer Corp Ltd (ASX:SFC)
SHAPE Australia Corp Ltd (ASX:SHA)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

Disclaimer

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