US stocks fell overnight as new data showed inflationary pressures were stronger than economists had anticipated. The Dow Jones Industrial Average dropped 0.53% to 43,914.12, marking its sixth consecutive day of declines. The S&P 500 fell 0.54% to 6,051.25. The Nasdaq Composite slipped 0.66% to 19,902.84, retreating after briefly crossing the 20,000 mark earlier in the week.
The decline follows the release of the producer price index (PPI), which tracks the prices businesses pay for goods and services. The index rose 0.4% for the month, double the 0.2% increase forecast by economists. The unexpectedly large rise suggests inflationary pressures are persisting. In response, the yield on the 10-year Treasury climbed to a two-week high as investors reassessed their outlook on interest rates.
Despite this, markets expect the Federal Reserve to cut interest rates by 25 basis points at its policy meeting next week. The CME FedWatch Tool shows a 95% chance of a cut, suggesting that investors believe the Fed will remain focused on supporting economic growth.
Tech stocks led the declines. Adobe tumbled over 13% after issuing a weaker-than-expected 2025 outlook. Nvidia, Meta, Alphabet, and Amazon also ended the day lower.
In Europe, the ECB cut its key rate by 25 basis points to 3%, while the Swiss National Bank made a larger 50 basis point cut. These moves signal a shift in focus from controlling inflation to boosting demand amid signs of economic weakness.
In currencies, one Australian dollar at 8:45am was buying 63.68 US cents, 60.84 Euro cents and 97.23 Japanese yen.
Turning to Australia, shares in data centre operator DigiCo Infrastructure REIT are set to start trading at midday today after a $2bn IPO, Australia’s largest in over six years. Launched by HMC Capital (ASX:HMC), the REIT is focused on ownership and operation of data centres.
Australian markets are expected to follow Wall Street’s lead, with ASX futures pointing to a 0.66% fall at the open.
Local investors remain cautious ahead of next week’s Federal Reserve decision and are watching for signs of how the Reserve Bank of Australia may respond to global economic conditions.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap, Marketech.
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