The Dow Jones index retreated on Tuesday ahead of the Federal Reserve interest rate decision. The index declined by more than 0.47%. Other major indices like S&P 500 index and Nasdaq index dropped. Each fell by more than 0.34% and 0.59% respectively after uneven US economic data.
US Inflation Concerns
The Dow Jones index reacted to the weak US economic data released on Tuesday. The US Producer Price Index (PPI) jumped 6.6% YoY in May. This was termed to be the fastest yearly growth rate in eleven years. The Producer Price Index for the month of May rose by 0.8%. This was stronger than the estimated forecast of a 0.6% increase.
Goods performed better than services in May. This was due to the lockdown restrictions that saw a decline in consumer demand for services-related purchases. Goods rose by 1.5% while services rose by 0.6%. Despite not recording large gains, the services index has been on an uptrend for 5 consecutive months.
The final demand PPI excluding food and energy, surged by 5.3%. This was the biggest increase since August 2014. Nonferrous metals jumped 6.9% while asphalt and basic organic chemicals fell. Grain prices rose by 25.7% as oil seeds and beef and veal went up by 19.5% and 10.5% respectively. Fruits fell by 1.9%.
Retail sales dropped by 1.3% MoM in May which was more than the estimated forecast of a 0.8% decline. This offset the 0.9% increase in the previous month. Core Retail Sales fell 0.7% MoM in the same month. This was weaker than the estimated forecast for a 0.2% increase.
Sales in garden supplies and building materials dropped 5.9% while miscellaneous store sales went down by 5%. Sales in general merchandise also declined by 3.3%. However, clothing, and accessory stores as well as bars and restaurants recorded gains in their sales.
According to the Labor Department, inflation has continued to rise especially with the easing of lockdown restrictions. Investors now eye the Fed’s decision on whether to tighten their monetary policy amid inflation and economic growth. Fed officials believe that the ongoing inflation will be transitory as the economy heads towards full recovery.
Dow Jones Movers
Among the top performers in the Dow Jones index include Boeing, Chevron, American Express and Procter& Gamble. Chevron was the best performer with a 1.57% gain after an increase in energy stocks. Boeing went up by 0.49% after large 737 Max jet orders. American Express and Procter & Gamble each rose by 1.29% and 0.2% respectively.
Some of the poor performers in the index include JP Morgan, Goldman Sachs, Caterpillar, and Nike. JP Morgan fell by 1.08% while Goldman Sachs and Caterpillar dropped by 1.08% and 0.61% respectively. Nike dropped by 1.10%.