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Indexes down: Dow 0.37%, S&P 500 0.26%, Nasdaq 0.10%

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Producer inflation rises more than expected in July

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Markets reduce Fed rate-cut expectations for 2025

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Deere, Tapestry flag strains from US tariffs

(Updates to after markets open)

By Johann M Cherian and Sanchayaita Roy

Aug 14 (Reuters) - Wall Street's main indexes declined

on Thursday, after a hotter-than-expected producer prices report

dampened investor expectations of potential interest-rate cuts

by the Federal Reserve this year.

A Labor Department report showed the Producer Price Index

rose 3.3% on an annual basis in July, higher than the 2.5% gain

expected by economists polled by Reuters. On a monthly basis, it

rose 0.9%, compared with an estimated 0.2% rise.

Traders lowered their Fed rate-cut expectations for the rest

of the year to about 58 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.

"It's sending a mixed message about the economy," said Peter

Andersen, founder of Andersen Capital Management in Boston.

"We have been too anxious to draw a conclusion that the

economy is fine, it's not overheated. But this wholesale data

does show that perhaps there is some inflation working and we

shouldn't be so quick to conclude that we need to cut interest

rates."

At 09:42 a.m. ET, the Dow Jones Industrial Average

fell 164.29 points, or 0.37%, to 44,757.98, the S&P 500

lost 16.84 points, or 0.26%, to 6,449.74 and the Nasdaq

Composite lost 22.69 points, or 0.10%, to 21,690.45.

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.

On Thursday, nine of the 11 S&P 500 sectors declined, with

materials, down 1.2%, falling the most. Rate-sensitive

small-caps and housing stocks also dropped more

than 1% each.

Separate data showed the number of Americans filing new

applications for jobless benefits fell last week amid low

layoffs.

A report also showed San Francisco Fed President Mary

Daly pushed back against the need for a 50-basis-point interest

rate cut next month, a day after Treasury Secretary Scott

Bessent said an aggressive half-point cut was possible.

Cisco Systems ( CSCO ) lost 1% after the network equipment

manufacturer's broadly in-line forecast did little to encourage

investors.

Deere & Co ( DE ) fell 8% after the farm-equipment maker

reported a lower quarterly profit and tightened its annual

profit forecast, while Tapestry plunged 17.6% after the

Coach handbag maker forecast annual profit below estimates.

Both companies warned of tariffs impacting their business.

Later in the day, investors will also tune into remarks from

St. Louis Fed President Alberto Musalem, a Federal Open Market

Committee voting member this year.

Declining issues outnumbered advancers by a 5.05-to-1 ratio

on the NYSE and by a 3.38-to-1 ratio on the Nasdaq.

The S&P 500 posted four new 52-week highs and no new lows

while the Nasdaq Composite recorded 24 new highs and 31 new

lows.