SOTS 2nd Hour: PPI Concerns, Charles Schwab’s Chief Strategist, & LIVE: St. Louis Fed President Musalem 8/14/25

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Sara Eisen (1:09)

Good Thursday morning, welcome to Squawk on the Street. I'm Sara Eisen with Carl Quintanilla. We are live from Post 9, as always, of the New York Stock Exchange. David has the morning off. Stocks are under a little pressure this morning. We've come off the lows of the morning so far, but take a look, S&P down a little more than a tenth of 1%.

NASDAQ is unchanged as TechOut performs, and the Dow is down about 128 points. We do have some sectors green, consumer discretionary, communication services and technology. Everybody else is red. Materials, real estate and energy are underperforming. NASDAQ Composite, though, just popping into positive territory. Again, some strength in technology today. As for Treasuries, it's been a busy week of data. We'll talk about PPI in just a moment, but they're selling off. Yields are a little bit firmer. Ten-year yield, 4.265%. The two-year yield a little elevated at 3.7%, but nothing major. Speaking of, today the Fed's next move in question after this morning's inflation data, St. Louis Fed President Alberto Musalem will join us in an exclusive interview with his first take. And yes, he is a voting member this year. Plus, Charles Schwab, Liz Ann Sonders, with what this all means for the market and your portfolio and a lack of luxury, tapestry shares getting crushed on concerns about tariffs. I spoke to the CEO about what she is seeing this quarter. We'll have those headlines for you coming up. But first, Carl, let's dive into that wholesale inflation report, PPI, because the number on the headline comes in hotter than expected, 0.9%. That was a big increase. It was more than expected. We only expected 0.2% increase. It was more than we got last year, which was only about a 0% increase. And it's the highest level since June 2022 So the first instinct is to worry. Oh no, all the tariffs are impacting inflation as people have been worried about. But there are some interesting things in here that are worth pointing out. For instance, portfolio management up 5.4% for the month. That's just stock prices going up. So that's not tariffs at all. Airfares, we know we're hot in the consumer price index. They were up 1% in the month. So that combination actually makes this a less worrisome, game-changing number for the Fed in terms of worries about inflation. Does it reflect the fact that some of these tariffs are feeding through into wholesale prices? Absolutely. But I will note services prices in here actually increased a lot more, 1.1% last month than goods prices, excluding food and energy, which only rose 0.4%.

Does it shift the Fed off course, or at least the market's thinking that the Fed is off course for a September rate cut? I don't think so.

Carl Quintanilla (3:42)

Yeah, I mean, I think it's high frequency economics this morning. This will be a kick in the teeth for anyone who thought the tariffs would not impact domestic prices in the US economy, will not be a long journey for producer prices to translate into consumer prices. Services actually made up almost 80% of the increase of PPI in July, which is not the offset we were hoping for to make up for any tariff-related inflation.

Sara Eisen (4:06)

Right, that 1.1% gain in services prices, that was the most since March 2022 And within that, you know, you saw the increases at wholesalers and retailers. So there is some tariff pressure coming through. The question at the Fed is going to be, can they look through that as a one-off and the fact that it's not happening as much as initially feared? And that will lead them to figure out whether they want to cut in September and they want to keep cutting. I would say the other thing that's changed lately is that the job market has shown weakness, which may ultimately lead to this is why the market is more confident about the Fed cut. Jobless claims, though, very solid again.