📉US100 plunges 1.5% after PPI data❗

⬇Fresh data and Fed Mester comments put pressure on US indices

Wall Street indexes took a hit after the release of a fresh data pack from the US economy. Stronger-than-expected producer price inflation reinforced expectations that the Federal Reserve will need to extend its tightening cycle.

The producer price index, a gauge of prices for final demand products, rose 0.7% over the previous month in January, the most since June 2022, while analysts expected a modest 0.4% gain. This report came on the heels of robust retail sales data and a hotter-than-expected CPI reading. Meanwhile initial jobless claims surprised on the downside which supports Fed's view that the labour market remains tight and inflation elevated, opening the door to further rate hikes. 

Additional fuel for the bears was provided by Fed Mester's, who revealed that a 50bp rate hike was considered during the last FOMC meeting. According to the banker, January's CPI data showed that there's still more to do on cooling inflation. Mester added that the return to price stability could be a "painful" process, and that the Fed's action alone would cause a decline in economic activity and higher unemployment. In Mester's opinion Fed rates must rise above 5% and remain there for an extended period of time.

US100 again failed to break above the key resistance zone around 13000 pts,  which coincides with 38.2% Fibonacci retracement of the upward wave launched in March 2020. As long as price sits below the aforementioned resistance, downward move may deepen towards key support at 12000 pts. Source: xStation5