Stocks closed nearly unchanged Thursday, retracing some earlier declines fueled by a pickup in factory-gate inflation that clouded the outlook for interest rates.
The producer-price index showed prices rose by a much stronger-than-expected 0.9% in July, the largest monthly increase in more than three years.
A day earlier, futures markets suggested investors were highly confident the Federal Reserve would cut rates in September, after Tuesday’s reassuring consumer-price index. Treasury Secretary Scott Bessent had talked up a larger, 0.5 percentage-point cut.
But traders moved early Thursday to slightly pare bets on a September cut, CME Group data showed.
San Francisco Fed President Mary Daly, who favors lowering rates next month, pushed back Wednesday against the case for a jumbo cut. “I’m worried it would send off an urgency signal that I don’t feel about the strength of the labor market,” she said.
Chicago Fed President Austan Goolsbee also signaled caution late Wednesday, flagging a jump in some services prices in the CPI report and saying the labor market remained solid.
The major U.S. stock indexes were little changed. The Dow dropped 11 points after earlier being down more than 200.
Treasury yields advanced. Ten-year yields, a key indicator of borrowing costs, rose toward 4.27%.
The dollar weakened against the Japanese yen after Bessent said the Bank of Japan was falling behind in tackling inflation.
Global stocks were mixed. European defense stocks rose ahead of Friday’s meeting between President Trump and Russian leader Vladimir Putin. Japanese and Chinese benchmarks fell.