FX.co ★ The inflation effect: how news affects stocks, the dollar and bond yields

The Producer Price Index (PPI) for final demand increased by 0.6% last month, exceeding the growth forecast of 0.3% predicted by economists surveyed, after an unreviewed rise of 0.3% in January, according to the Labor Department.

Data on consumer inflation at the beginning of this week also showed some resilience in inflation levels.

Further reports revealed that retail sales in the United States bounced back last month, increasing by 0.6%, but fell short of the 0.8% estimate. Meanwhile, the number of initial weekly unemployment claims dropped to 209,000, below the forecast of 218,000.

The data indicated that producer prices in the U.S. in February rose more than expected, driven by increased costs of goods such as gasoline and food.

Interest rate-sensitive sectors like utilities (.SPLRCU) and real estate (.SPLRCR) were among the weakest of the day: real estate fell by 1.6%, and utilities by 0.8%.

Nvidia (NVDA.O) shares fell by 3.2%, and the semiconductor index (.SOX) declined by 1.8%. Over the week, the index dropped by 3.5% as investors took profits following a recent sharp increase.

Since the beginning of the year, the S&P 500 index has increased by about 8%.

Shares of the small-cap Russell 2000 index (.RUT) fell by 2% for the day, lagging behind the overall market.

Shares of Robinhood Markets (HOOD.O) rose by 5.2% after the trading app operator reported a 16% increase in custodial assets in February.

The trading volume on U.S. exchanges amounted to 13.1 billion shares, compared to the average of 12.1 billion for the entire session over the last 20 trading days.

Decliners outnumbered advancers on the NYSE by a ratio of 3.77 to 1; on the Nasdaq, the ratio favoring decliners was 3.08 to 1.

The S&P 500 recorded 39 new 52-week highs and no new lows; the Nasdaq Composite reported 57 new highs and 186 new lows.

The Dow Jones Industrial Average (.DJI) fell by 137.66 points, or 0.35%, to 38,905.66, the S&P 500 (.SPX) lost 14.83 points, or 0.29%, to 5,150.48, and the Nasdaq Composite (.IXIC) dropped 49.24 points, or 0.30%, to 16,128.53.

Ahead of next week's Federal Reserve policy meeting, where a rate cut is nearly ruled out, the market reduced the chances of a cut at the June meeting, expecting a reduction of at least 25 basis points at a 59.9% likelihood, according to CME's FedWatch Tool, compared to 81.7% a week ago.

Bank of Japan officials will also meet next week. Officials, including Governor Kazuo Ueda, have attempted to temper expectations for an imminent departure from negative interest rates, which led to the yen's worst weekly performance in a month.

The yield on 10-year bonds was expected to see the largest one-day rise since February 13th.

The MSCI global stock index (.MIWD00000PUS) fell by 2.75 points, or 0.35%, to 772.53, while the STOXX 600 index (.STOXX) closed down 0.18% after reaching its third consecutive intraday record high. The overall European index, FTSEurofirst 300 (.FTEU3), lost 3.37 points, or 0.17%.

The dollar index rose by 0.53% to 103.29, and the euro fell by 0.5% to $1.0891.

Against the Japanese yen, the dollar strengthened by 0.32% to 148.22. The yen briefly strengthened against the U.S. dollar after Jiji news agency reported that the Bank of Japan had begun taking steps to end its negative interest rate policy at the meeting on March 18-19.

Investors are assessing the likelihood of a policy change this month, especially after news of significant wage increases at some of Japan's largest companies during this year's annual wage negotiations.

As for commodities, U.S. oil rose by 1.93% to $81.26 a barrel, and Brent oil reached $85.42 a barrel, up 1.65% for the day, marking the highest settlement price since November 6th, following the latest International Energy Agency (IEA) report predicting a tighter oil market in 2024.