Wall Street’s main indexes were mixed on Thursday with S&P 500 edging up to a closing high, while Dow Jones and Nasdaq were flat, after a hotter-than-expected producer prices report dampened expectations of potential interest-rate cuts.

A Labor Department report showed producer prices increased the most in three years in July due to a surge in the costs of goods and services, suggesting a broad pickup in inflation was imminent.

Traders trimmed their Fed rate-cut expectations for the rest of the year to about 56.7 basis points, according to data compiled by LSEG, compared with around 63 bps before the report.

But they are still fully pricing in a quarter-percentage-point cut in September.

“The implication is that the Fed is going to offer a 25-(basis point) cut in September. But it will be a hawkish cut. It’s way too early still for the Fed to wish to guide the market towards an extended easing cycle,” said Thierry Wizman, global FX and rates strategist at Macquarie Group.

“The next important thing will be the Expenditures Price Index later this month. If there are signals that there’s inflation broadly in services, the market will take that adversely.”

A separate report on Thursday showed the number of Americans filing new applications for jobless benefits fell last week.

According to preliminary data, the S&P 500 gained 1.69 points, or 0.03%, to end at 6,468.27 points, while the Nasdaq Composite lost 1.80 points, or 0.01%, to 21,711.34. The Dow Jones Industrial Average fell 19.70 points, or 0.04%, to 44,902.57.

Labor Market Weakness

Recent data reflecting labor market weakness and a moderate rise in consumer prices had strengthened expectations that the central bank will potentially lower interest rates next month.

However, Thursday’s report fanned concerns that U.S. tariffs on imports could start to impact prices in the coming months and dampen a rally in U.S. stocks that had helped the benchmark S&P 500 and tech-heavy Nasdaq log record highs over the past two sessions.

“U.S. stocks are pricy,” said Sam Stovall, chief investment strategist CFRA Research.

The S&P 500 index is trading at a price-to-earnings ratio of 23 based on forward estimates, or a near-40% premium to its 20-year average, he said.

The hotter-than-expected PPI report now has investors pulling petals from a daisy saying “They (the Fed) will cut rates, they won’t cut rates,” he added.

St. Louis Fed President Alberto Musalem, a voting member on the Federal Open Market Committee this year, said a half-point rate cut at the Fed’s September meeting is not warranted, a day after Treasury Secretary Scott Bessent said it was possible.

Cisco Systems declined after the network equipment manufacturer’s broadly in-line forecast did little to encourage investors.

Deere & Co fell after the farm-equipment maker reported a lower quarterly profit and tightened its annual profit forecast, while Tapestry plunged after the Coach handbag maker forecast annual profit below estimates.

Both companies warned of tariffs impacting their businesses.

In geopolitics, focus will be on President Donald Trump’s upcoming meeting with Russia’s President Vladimir Putin as he seeks to achieve a halt to the Ukraine conflict.

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(Reporting by Johann M Cherian and Sanchayaita Roy in Bengaluru and Saeed Azhar in New York ; Editing by Devika Syamnath and Aurora Ellis)