By Bansari Mayur Kamdar and Shreyashi Sanyal
(Reuters) - Wall Street's main indexes fell on Thursday, dragged down by declines in megacap growth stocks, while a slower rise in producer prices in December spurred hopes that inflation has potentially reached its peak.
The producer price index increased 0.2% last month after advancing 0.8% in November, the Labor Department said on Thursday amid falling cost of goods and signs that stretched supply chains were starting to ease.
In the 12 months through December, the PPI surged 9.7%, still below the 9.8% forecast of economists polled by Reuters.
"Investors are looking for signs of moderation in supply chain disruptions, as declining input costs would ultimately signal an easing of the consumer's price burdens," said John Lynch, chief investment officer for Comerica (NYSE:CMA) Wealth Management.
The PPI figures come a day after Wall Street indexes cheered consumer prices data that largely met market expectations despite hitting a 40-year high.
Six of the 11 major S&P 500 sectors fell, with technology leading the declines.
Pressuring the Nasdaq and the S&P 500 by midday were declines in Tesla (NASDAQ:TSLA) Inc, Microsoft Corp (NASDAQ:MSFT), Meta Platforms and Apple Inc (NASDAQ:AAPL).
"It's going to be a choppy first quarter, and you're going to see that the market is going to struggle until we get beyond that first Fed rate hike," said Edward Moya, senior market analyst at Oanda in New York.
Companies will report results on the final quarter of 2021 in the coming weeks. Year-over-year earnings growth from S&P 500 companies were expected to be lower in the fourth quarter compared to the first three quarters but still strong at 22.4%, according to IBES data from Refinitiv.
Banks JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) are due to report on Friday, while big technology and other mega-cap companies start next week.
As investors move to more value-oriented stocks in continued rotation out of growth and technology sectors, the S&P 500 banks index added 0.3%, hitting a record high.
Retail investors have also raised their exposure to bank stocks ahead of the earnings announcements, according to Vanda Research's weekly report on retail flows.
At 12:22 p.m. ET the Dow Jones Industrial Average was down 28.54 points, or 0.08%, at 36,261.78, the S&P 500 was down 36.42 points, or 0.77%, at 4,689.93 and the Nasdaq Composite was down 239.66 points, or 1.58%, at 14,948.73.
Delta Air Lines (NYSE:DAL) gained 3.0% after beating estimates for fourth-quarter earnings, lifting the S&P 1500 Airlines index by 3.3%.
Federal Reserve Governor Lael Brainard said the U.S. central bank would be in a position to start what could be several interest rate hikes this year "as soon as" it completes winding down its bond purchases, expected to happen in March.
Wells Fargo followed Goldman Sachs (NYSE:GS), JPMorgan and Deutsche Bank (DE:DBKGn) in forecasting that the Fed might raise interest rates four times this year.
Advancing issues outnumbered decliners by a 1.15-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.66-to-1 ratio on the Nasdaq. The S&P index recorded 43 new 52-week highs and no new low, while the Nasdaq recorded 62 new highs and 266 new lows.