By Ankika Biswas and Johann M Cherian
(Reuters) - Wall Street's main indexes slipped on Friday as a higher-than-expected rise in monthly producer prices fanned fears that the Federal Reserve could stick to aggressive interest rate hikes for longer.
Producer prices climbed 7.4% last month on an annual basis, the Labor Department's report showed, compared with economists' expectations of a 7.2% increase. The rise was, however, lower than the 8% in October.
Core producer prices, which exclude volatile food and energy components, jumped 6.2% compared with estimates of a 5.9% rise.
"It is disappointing and it shows that we are stuck on the treadmill of inflation and I'm not surprised to see the market sell-off like it is right now," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield.
However, bets that the Fed will raise its policy rate by 50 basis points to 4.25%-4.50% next week were largely unchanged as the report also showed that underlying trend in inflation had moderated.
Consumer prices data for November, due Tuesday, will provide fresh clues on the central bank's monetary tightening plans.
In another data, the University of Michigan's preliminary reading on consumer sentiment showed an improvement to 59.1 in December from 56.8 in November, helping the indexes bounce off their lows.
Wall Street's main indexes have come under pressure in December after two consecutive months of gains on fears of a potential recession next year due to extended U.S. rate hikes.
U.S. stocks had snapped a recent run of losses on Thursday after data showed initial jobless claims modestly rose last week, suggesting the labor market was deteriorating.
At 10:12 a.m. ET, the Dow Jones Industrial Average was down 86.15 points, or 0.26%, at 33,695.33, the S&P 500 was down 5.98 points, or 0.15%, at 3,957.53, and the Nasdaq Composite was down 16.35 points, or 0.15%, at 11,065.66.
Most mega-cap technology and growth stocks such as Alphabet (NASDAQ:GOOGL) Inc, Nvidia Corp, Tesla Inc (NASDAQ:TSLA) and Amazon.com (NASDAQ:AMZN) were mixed.
Netflix Inc (NASDAQ:NFLX) gained 4.5% after Wells Fargo (NYSE:WFC) upgraded the streaming giant's stock to "overweight" from "equal weight", while Carvana Co dropped 8% after Jefferies halved the price target for the used-car retailer's stock.
Broadcom (NASDAQ:AVGO) Inc inched up 3.6% after the chipmaker forecast current-quarter revenue above Wall Street estimates.
Lululemon Athletica (NASDAQ:LULU) Inc tumbled 12.2% after the athletic apparel maker forecast lower-than-expected holiday-quarter revenue and profit.
Boeing (NYSE:BA) Co gained 1.6% on a report of plans to announce a deal with United Airlines (NASDAQ:UAL) for orders of 787 Dreamliner next week.
Declining issues outnumbered advancers for a 1.13-to-1 ratio on the NYSE and 1.18-to-1 ratio on the Nasdaq.
The S&P index recorded five new 52-week highs and one new lows, while the Nasdaq recorded 24 new highs and 96 new lows.