Stocks, Treasury Yields Fell After Wholesale Inflation Eased, Debt Ceiling Uncertainties

Barry Adams
11 May, 2023
New York City

Stocks on Wall Street declined after investors reviewed wholesale inflation report and another batch of corporate earnings amid a growing uncertainties about the debt ceiling negotiations. 

Benchmark indexes traded lower despite the second inflation reading in as many days showed cooling of price increases. 

Producer price index, a measure wholesale inflation declined for the tenth month in a row.  

On Wednesday, consumer prices index also eased to 4.9% in April following the slower increases in food and energy costs. 

Regional bank worries resurfaced after the Los Angeles-based  PacWest reported outflow of deposits, a critical pillar for the support of its business. 

Disney stock dropped close to 9% after the company reported a drop in streaming services subscriber growth 

G7 finance ministers and central bank governors kicked off their meeting in Niigata, Japan on Thursday but focus was on the ongoing discussion between U.S. leaders in finding a compromise in raising the debt ceiling. 

U.S. Treasury Secretary Janet Yellen said at a press conference in Japan that the U.S. could run out of money on June 1 if the current debt ceiling of $31.4 trillion is not raised. 

Default on financial obligation "would produce an economic and financial catastrophe" and added "there was no good reason to generate a crisis of our own making."

 

Producer Price Index Extended 10-month Decline In April

Producer price index in April increased 0.2% from the previous month, the U.S. Bureau of Labor Statistics reported Thursday. 

The measure of wholesale inflation declined 0.4% in March and was unchanged in February. 

The index for final demand goods increased 0.2% and for services rose 0.3% and contributed to an 80% increase in overall index. 

Core index, which excludes food, energy and services, increased 0.2% in April after increasing 0.1% in March. On an annual basis the core index advanced 3.4%. 

Over one third of the April advance in the index for final demand services can be   traced to a 4.1% rise in prices for portfolio management and 8.4% advance in prices for gasoline was a major factor in the April increase in the index for final demand goods.

On an annual basis, the wholesale price inflation index declined for the tenth month in a row to 2.3% from the high of 11.2% in July. 

 

U.S. Indexes & Yields 

The S&P 500 index increased 0.6% to 4,112.12 and the Nasdaq Composite dropped 0.6% to 12,262.25. 

The yield on 2-year Treasury notes hovered at 3.82%, 10-year Treasury notes edged up to 3.35% and 30-year Treasury bonds held at 3.74%. 

Crude oil fell $1.13 to $71.44 a barrel and natural gas prices fell 1 cent to $2.18 a thermal unit. 

 

U.S. Stock Movers 

Walt Disney Company declined 8.8% to $92.29 after the theme park operator and media company reported a significant decline in streaming subscribers even as quarterly loss in the division improved. 

Unity Software Inc rose 11.4% to $31.95 after the video game software developer lifted its revenue estimate for 2023. 

PacWest Bancorp plunged 19.5% to $4.88 after the regional bank said deposits declined 9.5% for the week  ended May 5. 

In the first quarter, total interest income increased to $517.7 million from $322.9 million and the company swung to a net loss of $1.2 billion from a profit of $120.1 million and diluted earnings per share was ($10.22) from $1.01 a year ago. 

Other regional banks declined on the news and Western Alliance and Zions Bancorp fell 3%. 

Alphabet Inc Class A stock gained 5.0%to $117.0 after the company released AI tools at its annual conference for developers in Mountainview, California.

The parent of Google and YouTube also released a foldable phone with AI search tools that cost as much as $1,799.