Earlier this week, falling bond yields and growing expectations for aggressive Federal Reserve interest-rate cuts in the months ahead helped spark a rotation away from what had been working in the U.S.

US stocks mostly stalled on Thursday as Wall Street digested a much hotter-than-expected PPI inflation print, souring optimism around a large September rate cut. July's Producer Price Index (PPI) came in well above expectations,

The monthly rise was the biggest since June 2022, and the annual increase the highest since February this year. Core PPI, which strips out volatile data points, rose by 3.7 percent over the year, its highest annual rise since April 2021. The PPI measures the output prices for domestic producers of goods and services before they reach consumers.

The headline PPI reading rose 0.9% month-over-month. This was more than 4X the increase economists were expecting. Read more

The S&P 500 rally has a downside for inflation: surging portfolio management costs. Those costs surged 5.8% in July. Yet while portfolio costs are part of the core PCE price index, Fed Chairman Jerome Powell has said that policymakers are more concerned with market-based prices.

The Producer Price Index surged in July, in part due to tariffs. Consumers could face sharp inflation again toward the end of the year.

The Labor Department reported Thursday that the producer price index (PPI)—a measure of wholesale inflation before it hits consumers—rose 0.9% from June to July, the biggest jump since 2021. Compared with a year earlier, wholesale prices were up 3.3%.

Treasury yields ticked higher after the hotter-than-expected PPI reading, though yields remained below Wednesday end-of-day levels.