U.S. equity markets closed lower Thursday as producer inflation surprised to the upside, crude prices surged above $100 a barrel, and rate-hike expectations intensified.
The S&P 500 fell 0.6 percent. The Nasdaq 100 dropped 1.1 percent. The Dow Jones Industrial Average declined 0.6 percent. The Russell 2000 rose 0.5 percent.
The August Producer Price Index expanded 0.4 percent month-over-month, lifting headline annual producer inflation to 5.4 percent versus economist expectations of 5.3 percent. West Texas Intermediate crude futures topped $100 a barrel for the first time since May 19, driven by escalating Middle East tensions.
CME Group's FedWatch gauge showed rate-hike odds climbing to nearly 70 percent. The Federal Reserve had previously signaled a policy pause, but persistent inflation may force an earlier monetary tightening.
Clark Bellin, Bellwether Wealth, said in an interview: "Inflation is still a problem." He added that while rate increases cannot address crude-driven price pressures, the Fed must respond to broad inflationary signals.
Semiconductor stocks bore the brunt of the selloff. The VanEck Semiconductor ETF (SMH) fell 2.3 percent and the iShares Semiconductor ETF (SOXX) dropped 2.7 percent. Micron Technology (MU), Advanced Micro Devices (AMD), Broadcom (AVGO), and Nvidia (NVDA) all declined. The Vanguard Information Technology ETF (VGT) fell 1 percent, pressured by Meta (META) and Amazon (AMZN).
Oracle Corp. (ORCL) reported triple-digit growth in cloud infrastructure for its most recent quarter, underscoring its artificial intelligence expansion.
Adobe (ADBE) stock declined after the company issued softer fourth-quarter revenue guidance, offsetting strong recent results.
Nvidia Chief Executive Officer Jensen Huang said Thursday that artificial intelligence compute demand continues to outpace supply. He flagged cybersecurity as the next major AI growth vector.
Uber (UBER) CEO Dara Khosrowshahi disclosed an open-market share purchase worth approximately $10 million.
Consumer price inflation data is due Friday and will shape near-term rate-path expectations.
