Nasdaq Drops 0.6% After Inflation Surprise as Traders Raise Bets on Fed Rate Hike Before Sept. 16 Decision

A hotter-than-expected wholesale inflation reading on September 10 rattled equity markets and pushed traders to increase bets on a Federal Reserve rate hike ahead of the central bank's September 16 vote. The Producer Price Index for August showed final demand rising 0.4%, with goods prices surging 1.1% and services up 0.1%, bringing the year-over-year rate to 5.4%. Short-term interest-rate futures fell slightly after the data as markets repriced the odds of further tightening.

The Nasdaq Composite fell 168.07 points, or 0.6%, to close at 26,253.34, while the S&P 500 slid 37.16 points, or 0.5%, to 7,636.36. Twenty-five of the 30 Dow components finished in negative territory. Oil prices added to the inflationary backdrop, with West Texas Intermediate rising above $97 a barrel amid Middle East tensions, and Treasury yields surged alongside crude.

The PPI release sets up a high-stakes consumer price index report due Friday, September 11. Both figures feed into the Fed's preferred inflation gauge, the personal consumption expenditures index, which will be published after the rate vote. Bitcoin traders dialed back bullish positions ahead of the data, reflecting broader caution across risk assets heading into the Fed meeting.