August producer price data in the United States came in above expectations, prompting traders to lift the probability of a September Federal Reserve rate hike to above 70%. U.S. equities fell for a fourth straight session on Thursday, though the session was split beneath the surface: Apple and Meta advanced, while memory-chip names retreated. The market’s next focal point is the U.S. August CPI report due later today.
PPI surprise drives tighter rate pricing
Major U.S. indexes closed lower. The S&P 500 fell 0.58% to 7591.70, the Nasdaq dropped 0.65% to 26081.720, and the Dow Jones Industrial Average lost 0.60% to 52064.10. The VIX rose about 5.3% to 17.28.
The main pressure point was August PPI. Headline PPI rose 5.4% year over year, above the market expectation of 5.3% and higher than the prior 4.7%. On a monthly basis, it rose 0.4%, matching expectations and marking the largest increase since May. Core PPI rose 0.2% month over month, below both the prior reading and the consensus call of 0.3%, though the year-over-year figure still reached 4.6%.
After the release, the 10-year U.S. Treasury yield briefly climbed toward 4.89% intraday and later stood at 4.849%, up more than 5 basis points and at its highest level in nearly three years. The 2-year yield rose more than 3 basis points to 4.442%.
Traders have now raised the implied odds of a September Fed hike to more than 70%, while fully pricing in a first hike by October at the latest. The spread between the 2-year and 10-year Treasury yields narrowed to about 40 basis points, reflecting tighter market pricing for the Fed’s policy path.
The U.S. Dollar Index slipped for a third straight trading day, down 0.06% at 98.78. According to the report, Treasury yields and the dollar diverged as rising oil prices lifted inflation expectations, but concerns about fiscal discipline and debt supply weakened the dollar’s safe-haven appeal.
Brent breaks above $107 as Middle East tensions intensify
Beyond rates, geopolitical risk was another major drag on sentiment. The report said the conflict in the Middle East escalated further: the U.S. military expanded strikes to Iranian crude transport vessels, Houthi forces attacked energy facilities inside Saudi Arabia, and Iran carried out large-scale retaliation against commercial tankers and U.S. military targets. The focus has shifted from supply disruption risk in the Strait of Hormuz to a shipping conflict centered on control of the waterway, with spillover toward Saudi Arabia and the Red Sea.
Oil prices extended their sharp gains. Brent for November rose 6.34% to $107.63 a barrel, while WTI for October climbed 6.69% to $102.48. Diesel crack spreads approached $100. The report added that Saudi Aramco’s Jizan refinery has not returned to normal operations since coming under attack in July, making diesel supply tightness a more important issue than crude itself.
Energy was the only S&P 500 sector to finish higher, up 1.09%. Industrials and consumer discretionary were the weakest groups, down 1.51% and 1.39%, respectively.
Apple and Meta gain while memory names retreat
Large-cap tech did not move in one direction. Apple rose 3.56% to $326.57, leading the so-called Magnificent Seven. Meta gained about 4%. The report said investor interest continued after Meta introduced its personal AI agent, Muse, the day before. Microsoft added 0.16%, Google C rose 0.61%, and the Wind U.S. Magnificent Seven index edged up 0.11%.
Memory stocks, however, pulled back as the Philadelphia Semiconductor Index fell 2.66%, with 25 of its 30 components closing lower. Intel dropped more than 6%, Lam Research lost 5.65%, ARM fell more than 4%, and Micron Technology declined nearly 4%. Qualcomm, AMD, ASML, NVIDIA, and TSMC each fell more than 2%. SK Hynix closed down nearly 5% at $188.25, giving back part of its earlier gains.
The report argued that the retreat does not negate the broader AI hardware thesis. SK Hynix, Micron, and other names had reached fresh highs over the prior several sessions, leaving them exposed to profit-taking once hotter PPI data pushed rates higher. The tension between long-term order momentum in memory and optical communications and short-term valuation pressure will remain a market focus over the next several sessions.
Among Chinese stocks listed in the U.S., the Nasdaq Golden Dragon China Index fell 2.08%. Alibaba dropped 2.8%, while iQIYI lost 5%.
Gold regains $4,400 as industrial metals weaken
Commodity performance also split sharply. Gold rose 1.07% to $4,402.00 an ounce and touched $4,434.1 intraday, moving back above the $4,400 mark. Silver gained 2.32% to $67.28 an ounce.
The World Gold Council said global gold ETF net inflows reached $18 billion in August, the second-largest monthly inflow on record. Total assets under management rose to $615 billion, and holdings increased to 4,189 tonnes, a record high.
Industrial metals moved lower. COMEX copper futures fell 5.24% to $6.5275 per pound. The report attributed the decline to a jump in Treasury yields and tighter dollar liquidity.
In crypto, Bitcoin traded at about $78,137, down 0.52% over 24 hours, while Ether changed hands near $2,461, down more than 1%.
Two points in focus today
The report identified the U.S. August CPI release as the final key inflation print of the week and the main variable for the September rate path. With the stronger-than-expected PPI report already pushing hike odds above 70%, CPI will determine whether that probability rises further or pulls back. Traders are using PPI components to estimate CPI, and a simple regression in the report suggests August CPI may come in around 0.4% month over month, in line with market expectations but faster than the previous month. If core CPI exceeds 0.3% month over month, rate-hike expectations could strengthen again. If it comes in below 0.2%, markets may get a brief reprieve.
The other item on watch is the market reaction following Apple’s latest product launch. Apple shares rose 3.56% on Thursday, but the report said early sales and supply-chain feedback for the foldable iPhone Duo still need time to be verified. The next question for the consumer electronics supply chain is whether market pricing shifts from launch-event expectations to actual sales validation.
