S&P 500, Nasdaq fall as megacaps slide after producer prices data

Traders work on the floor of the NYSE in New York

News Corp up as quarterly profit tops estimates
US-listed China stocks fall as stimulus measures disappoint
US consumer sentiment dips in August
July annual PPI 0.8% vs estimates of 0.7%
Indexes mixed : Dow up 0.10%, S&P down 0.29%, Nasdaq down 0.78%

Aug 11 (Reuters) – The S&P 500 and Nasdaq fell on Friday as rate-sensitive megacap growth stocks declined after hotter-than-expected producer prices data for July sent U.S. bond yields higher.

U.S. producer price index (PPI) climbed 0.8% in the 12 months leading to July, up from a 0.2% rise in the previous month, as costs of services increased. Economists polled by Refinitiv had expected a 0.7% gain.

Though traders broadly expect the Federal Reserve to not tighten credit conditions for the remainder of the year, bets for no rate hike in September slipped to 88.5% from 90% before the data landed.IRPR

“The PPI data shows that the inflation monster is still lingering but investors can see progress in the things that come under CPI,” said David Russell, vice president of market intelligence at TradeStation.

Yield on the 2-year treasury note , that moves in line with near-term interest rate expectations, climbed to 4.88%, pressuring rate-sensitive technology and growth names.

Tesla (TSLA.O), Nvidia (NVDA.O) and Microsoft (MSFT.O) lost between 1.0% and 3.1%.

Benchmark U.S. indexes finished marginally higher in the previous session as worries about the U.S. economy’s longer-term prospects and concerns over further growth in stocks eclipsed milder-than-feared consumer prices data that had initially sent shares soaring.

The drop in megacap growth and technology stocks, which have led outsized gains this year, has put the tech-heavy Nasdaq (.IXIC) and the S&P 500 (.SPX) on track to end lower for a second straight week.

At 11:28 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 33.91 points, or 0.10%, at 35,210.06, the S&P 500 (.SPX) was down 13.13 points, or 0.29%, at 4,455.70, and the Nasdaq Composite (.IXIC) was down 107.48 points, or 0.78%, at 13,630.51.

While U.S. consumer sentiment dipped in August, Americans are optimistic that inflation will edge lower over the next year and beyond, according to a preliminary reading of a University of Michigan survey.

Keeping the Dow afloat, healthcare (.SPXHC) and energy (.SPNY) sectors advanced.

“The market is seeing some healthy rotation, with money moving away from the large growth names into other sectors that were real laggards for a lot of the year,” Russell added.

Among other movers, News Corp (NWSA.O) rose 3.3% after the Rupert Murdoch-owned media conglomerate beat quarterly profit estimates, thanks to its cost-cutting efforts.

U.S.-listed shares of Chinese companies Alibaba and JD.com fell 4.1% and 5.8%, respectively, as Beijing’s latest stimulus measures disappointed investors, while fresh data showed that the country’s post-pandemic recovery was losing steam.

Declining issues outnumbered advancers by a 1.10-to-1 ratio on the NYSE and a 1.49-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and three new lows, while the Nasdaq recorded 34 new highs and 131 new lows.

Reporting by Bansari Mayur Kamdar and Johann M Cherian in Bengaluru; Additional reporting by Shashwat Chauhan; Editing by Vinay Dwivedi

Our Standards: The Thomson Reuters Trust Principles.

Bansari reports on the global financial markets and writes Reuters’ daily flagship market reports on equities, bonds and currencies. An economist by training and winner of the Arthur MacEwan Award for Excellence in Political Economy, she has written for renowned global papers and magazines including The Diplomat, Boston Globe, Conversation, Huffington Post and more.

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