"The S&P 500 closed the final trading session of last week down 0.43% after U.S. Producer Price Index (PPI) data came in higher than expected, reinforcing concerns that inflationary pressures at the production level have not yet fully eased. Specifically, headline PPI rose 0.5% month-on-month, well above the forecast of 0.2%, while Core PPI surged 0.7% m/m, significantly exceeding market expectations. These figures indicate that input costs for businesses remain under considerable pressure, despite recent optimism surrounding easing inflation."
"PPI is a key indicator with direct implications for corporate profit outlooks. When production costs rise faster than anticipated, companies' ability to preserve profit margins is constrained, particularly in an environment where consumer demand has yet to show a strong recovery. As a result, investors are forced to reassess current market valuations, which remain elevated relative to historical averages, thereby triggering a defensive pullback in the S&P 500."
"Selling pressure during the session was uneven across the index. Stocks such as KLA Corp (KLAC), Applied Materials (AMAT), Lam Research (LRCX), and AMD weakened simultaneously following less constructive earnings outlooks and rising cost concerns. Given their large market capitalizations and meaningful index weightings, these stocks contributed notably to the S&P 500's decline. In contrast, some mega-cap names such as Apple (AAPL) posted relatively more positive performance, though this was insufficient to offset broad-based selling across the technology and growth sectors."
Headline PPI rose 0.5% month-on-month and Core PPI jumped 0.7% m/m, both well above expectations, signaling persistent input cost pressures. Elevated producer inflation constrains companies' ability to protect profit margins, especially amid tepid consumer demand. Investors reassessed high market valuations, producing a 0.43% decline in the S&P 500. Selling was uneven, with semiconductor and chip-equipment names such as KLAC, AMAT, LRCX, and AMD weakening and amplifying the index decline due to their large weightings; some mega-cap names like Apple outperformed but could not offset broad technology and growth sector weakness. Strong PPI reinforced a "higher for longer" interest rate outlook.
Read at London Business News | Londonlovesbusiness.com
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