Update: US Equity Indexes Edge Up After Producer Price Inflation Unexpectedly Drops, Iran Signals Red Sea Disruption
(Updates with index/price moves, macroeconomic/rates data, and company/geopolitical news from the first paragraph.)US equity indexes ground higher following a surprise decline in the wholesale price inflation rate and a signal from Iran that its allies could shut the maritime gateway to the Red Sea.The Nasdaq rose 0.4% to 26,221.4, the S&P 500 climbed 0.3% to 7,564.7, and the Dow Jones Industrial Average advanced 0.3% to 52,643.8 after midday Wednesday. All three gauges briefly traded moderately lower earlier in the session. Communication services and consumer discretionary topped the gainers, while energy led the decliners.The US Producer Price Index fell 0.3% in June following a 0.6% increase in May, below the flat consensus in a Bloomberg-compiled survey. Excluding food and energy, core PPI rose 0.2%, slower than the 0.3% gain expected and a 0.1% rise in May. PPI was up 5.5% year-over-year in June, versus the 6% gain in May, while core PPI climbed 4.7%, up from 4.6% in May.The probability of the Federal Reserve leaving its policy unchanged in July rose to 90% following the PPI data, from 84% a day ago and 69% a week ago, the CME FedWatch tool showed Wednesday. The likelihood of a pause continuing across September, October, and December also jumped. On Tuesday, market expectations for an unchanged monetary policy surged after the June consumer price inflation rate declined the most since April 2020.Most US Treasury yields fell after midday, with the 10-year down 4.4 basis points to 4.54% and the two-year declining 6.9 basis points to 4.12%.US Central Command struck Iran's coastal defense systems and cruise missile storage and launch sites on Greater Tunb Island during the 90-minute wave on Wednesday, it said. "The strikes further degraded Iran's ability to attack commercial shipping in the Strait of Hormuz." The strikes followed attacks overnight.Iran is now signaling it could use Yemen's Houthi allies to shut the Bab el-Mandeb gateway to the Red Sea, opening a new front against Washington and putting two of the world's most important energy arteries at risk, Reuters reported. As US strikes deepen inside Iran and Houthi attacks escalate in tandem, analysts said Tehran is widening the conflict and seeking to increase pressure on Washington by extending the threat to global trade and energy supplies beyond the Gulf, the news report said.The front-month global benchmark North Sea Brent shed 0.2% to $84.53 a barrel, and the US West Texas Intermediate declined 0.4% to $79.05 a barrel, off session highs.Excluding inventories in the Strategic Petroleum Reserve, US commercial crude oil stocks fell by 1.7 million barrels in the week ended July 10, following the Labor Day weekend, versus a 1.8 million-barrel decline expected in a Bloomberg-compiled poll and a 3.0-million-barrel gain in the previous week. Gasoline stocks fell by 1.5 million barrels, smaller than the 2.0-million-barrel decrease expected. Further, distillate stocks rose by 4.6 million barrels, compared with an expected drop of 2.0 million barrels.In precious metal markets, gold futures retreated 0.2% to $4,060.90, and silver futures slumped 2.2% to $57.78.In company news, Dutch semiconductor equipment supplier ASML (ASML) reported year-over-year growth in Q2 earnings and sales and raised revenue guidance for the full-year 2026.Mega-cap banks continued to post strong results. Morgan Stanley's (MS) Q2 sales beat the outlook, with robust investment banking and trading driving the top line higher year over year. BlackRock (BLK) also reported higher Q2 adjusted earnings and revenue. The Bank of New York Mellon (BNY) reported its Q2 adjusted earnings and revenue above market expectations.Payments firm Stripe and Advent International have offered to acquire PayPal (PYPL) for $60.50 per share in a deal valuing the company at more than $53 billion, Reuters reported, citing two unnamed people familiar with the matter.
