U.S. stocks opened lower Thursday as hotter annual producer inflation and oil above $100 revived fears that the Federal Reserve may need to raise interest rates again.
The S&P 500 fell 0.55% to 7,594.74 at the open, while the Nasdaq Composite dropped 0.88% to 26,021.05. The Dow Jones Industrial Average slipped 0.17% to 52,291.85.
The catalyst was August producer inflation. The PPI rose 0.4% month over month, matching forecasts, but accelerated to 5.4% year over year from 4.8% in July. Energy prices jumped 4.2%, keeping attention firmly on the inflationary impact of higher oil prices.
Nasdaq Takes the Biggest Hit
The Nasdaq is absorbing the strongest pressure because higher inflation and bond yields weigh most heavily on expensive growth stocks.
Treasury yields and tech stocks explainer shows why the relationship matters: when Treasury yields rise, future earnings are discounted more heavily and government bonds become more competitive with high-valuation equities.
That makes the current backdrop especially uncomfortable for AI and semiconductor stocks, which entered September with elevated valuations after another strong earnings season.
The market had already shown similar sensitivity earlier this month when the S&P 500 and Nasdaq fell as renewed U.S.-Iran fighting pushed Brent toward $95 and lifted Treasury yields.
Now oil has moved even higher.
$100 Oil Raises the Inflation Stakes
Brent crude remained above $100 a barrel Thursday after intensified attacks on Gulf shipping raised concerns about energy supply disruptions. Reuters reported Brent around $104.79 during the session.
That matters for stocks because expensive energy can feed directly into transportation, manufacturing and consumer costs.
It also complicates the Fed outlook.
Before the PPI report, markets were already pricing roughly a 62% chance of a 25-basis-point rate hike at the September meeting. Reuters later put that probability closer to 65% as investors awaited Friday’s CPI report.
Coinpaper recently highlighted the same tension in its coverage of the 5% Treasury yield risk, where higher long-term rates were already clouding the September outlook.
CPI Is the Next Major Trigger
The next test arrives Friday with U.S. consumer inflation.
Reuters’ economist poll expects 0.4% monthly headline CPI and 3.4% annual inflation, while core CPI is forecast at 0.2% monthly and 2.4% annually.
A hotter print could strengthen the case for a Fed hike and push Treasury yields even higher.
That would leave the Nasdaq most exposed, while the S&P 500 could test support around 7,620 to 7,577, according to Reuters technical analysis.
Resistance sits near 7,756-7,771.
