US STOCKS-Wall St set for lower open after hot producer inflation data

By Johann M Cherian and Sanchayaita Roy

Aug 14 (Reuters) - Wall Street's main indexes were on track to open lower 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 now expect the central bank to lower rates by about 58 basis points through the rest of the year, according to data compiled by LSEG, compared with around 63 bps before the data.

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."

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 reflect on prices in the coming months and could dampen a rally in U.S. stocks that had helped the benchmark S&P 500 .SPX and tech-heavy Nasdaq .IXIC log record highs over the past two sessions.

At 08:52 a.m. ET, Dow E-minis YMcv1 were down 141 points, or 0.31%, S&P 500 E-minis EScv1 were down 20.5 points, or 0.32%, and Nasdaq 100 E-minis NQcv1 were down 87.25 points, or 0.36%.

Futures tracking the rate-sensitive small-cap Russell 200 index RTYcv1 lost 1.2%.

Investors also assessed separate data that showed the number of Americans filing new applications for unemployment benefits came in at 224,000 for the week ended August 9, compared with estimates of 228,000.

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.

Wall Street's recovery from April lows has also elevated valuations of the S&P 500 beyond long-term averages, aided by better-than-expected earnings from megacap companies and more clarity on trade deals.

Cisco Systems CSCO.O forecast first-quarter revenue above estimates, driven by the artificial intelligence boom. However, its shares were down 2% in premarket trading.

Deere & Co DE.N fell 6.5% after the farm-equipment maker reported a lower quarterly profit and tightened its annual profit forecast, while Tapestry TPR.N plunged 12% 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.