The short-lived stock market rally ended when the Federal Reserve announced it would hold interest rates. Fed Chair Powell said that the producer price index (“PPI”) report emphasized the central bank’s concerns about persistent inflation.
The Fed has a dual mandate of achieving maximum employment at stable inflation rates. Even though the labor market is showing potential weakness, wholesale inflation in February increased. The PPI rose by 0.7% month-over-month. Markets expected a rise of 0.3%.
The major indices fell after the announcement at 2 p.m. Technology stocks led the decline, as Amazon (AMZN), Tesla (TSLA), Broadcom (AVGO), and Microsoft (MSFT) dropped. Nasdaq (QQQ) fell by 1.46%, compared with a 1.36% drop in the S&P 500 (IVV) and a 1.61% drop in the iShares Russell 2000 ETF (IWM).
Credit card stocks fell by more. Visa (V) was -3.06% while Mastercard fell by 3.58%. Current rates would restrict lending to consumers. Retail stocks fell, too. Walmart (WMT), Costco (COST), Dollar General (DG), and Dollar Tree (DLTR) dropped. Investors also sold off household defensive companies. P&G (PG) and Kenvue (KVUE) dropped. Food stocks like Coke (KO), Pepsi (PEP), and Monster Beverages (MNST) pulled back.
No Rate Cuts in 2026
Markets are still hopeful that rates will fall by 25 bps. It needs that optimism, since stock prices trade at a premium. They fail to price in the oil price shock that started in March. That increase would only send March’s CPI higher.
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