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Indexes down: Dow 0.22%, S&P 500 0.05%, Nasdaq 0.01%

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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 afternoon)

By Johann M Cherian, Sanchayaita Roy and Saeed Azhar

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

At 02:04 p.m. ET, the Dow Jones Industrial Average

fell 98.37 points, or 0.22%, to 44,823.90, the S&P 500

lost 3.70 points, or 0.05%, to 6,463.05 and the Nasdaq Composite

lost 3.04 points, or 0.01%, to 21,710.10.

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.

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

materials falling the most, down 1.1%.

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 ( CSCO ) lost 1.6% after the network equipment

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

investors.

Deere & Co ( DE ) fell 6.85% after the farm-equipment maker

reported a lower quarterly profit and tightened its annual

profit forecast, while Tapestry plunged 14% 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.

Declining issues outnumbered advancers by a 3.26-to-1 ratio

on the NYSE.

On the Nasdaq, declining issues outnumbered advancers by a

2.56-to-1 ratio.

The S&P 500 posted 13 new 52-week highs and one new low

while the Nasdaq Composite recorded 65 new highs and 69 new

lows.