US benchmark stock indexes fell as hotter-than-expected wholesale prices pushed government bond yields higher, and bets increased for an aggressive response from the Federal Reserve at its policy meeting in March.
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The Nasdaq Composite declined 0.7% to 11,993.2, with the S&P 500 down 0.6% to 4,122.3 and the Dow Jones Industrial Average 0.6% lower at 33,909.5. Real estate and utilities led the broad-based decline in which all sectors slumped after midday on Thursday.
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The US 10-year yield rose 2.1 basis points to 3.83%, with Treasury yields of other maturities trending higher intraday.
In economic news, the US producer price index rose by 0.7% in January following a 0.2% decrease in December, above the 0.4% gain expected in a survey compiled by Bloomberg. Excluding food and energy prices, core PPI rose by 0.5%, faster than the 0.3% gain expected and following a 0.3% increase in the previous month.
US initial jobless claims fell to 194,000 in the week ended Feb. 11 from 195,000 in the previous week, compared with expectations for an increase to 200,000 in a survey of analysts compiled by Bloomberg.
Core inflation remains stubbornly high and, as a result, it is still necessary for the FOMC to raise the federal funds rate above 5% and keep it there for some time to mitigate the risk that inflation will reaccelerate, Cleveland Fed President Loretta Mester said Thursday.
Mester sees a compelling economic case for a 50-basis-point increase in March versus the 25-basis-point hike in its previous meeting.
The probability that the FOMC will raise interest rates by 50 basis points in March increased to more than 15% on Wednesday, according to the CME FedWatch Tool. That compared with more than 12% on Tuesday, 9.2% a week earlier, and 5.2% a month ago.
In company news, Cisco Systems (CSCO) fiscal second-quarter results surpassed market expectations following a boost from product sales, and the company also lifted its full-year guidance. Shares of the provider of networking, cloud and security solutions jumped 5.8%, the top performer on the Dow.
West Texas Intermediate crude oil rose 0.5% to $78.94 per barrel intraday.