U.S. Stocks Fall as Oil Tops $100, Inflation Fuels Rate-Hike Fears

US stocks fell Thursday as oil prices remained above $100 a barrel and traders reacted to an acceleration in US wholesale inflation driven partly by higher energy costs.

Wall Street stocks fell as surging oil prices and stronger-than-expected US wholesale inflation renewed concerns about higher interest rates. [Photo: New York Stock Exchange Facebook]

The Dow Jones Industrial Average fell about 0.4% shortly after the opening bell, while the S&P 500 dropped 0.5% and the Nasdaq Composite declined 0.8%. The moves came after government data showed the Producer Price Index (PPI) rose 5.4% in August from a year earlier.

On a monthly basis, producer prices increased 0.4% in August.

Higher energy costs were a major contributor to the increase, adding to concerns that elevated fuel prices could keep inflation above the Federal Reserve's 2% target.

Oil prices also surged, with Brent crude rising above $105 a barrel and US West Texas Intermediate (WTI) crude topping $100. The increase reflected continuing disruptions and risks to energy supplies associated with the war involving Iran.

The rise in oil prices has also pushed up Treasury yields.

The 30-year US Treasury yield reached about 5.35%, its highest level since 2007, according to market reports.

Higher yields can put pressure on stock valuations by increasing borrowing costs and making bonds relatively more attractive to investors.

The combination of stronger wholesale inflation and surging energy prices has increased expectations that the Federal Reserve could tighten monetary policy further.

The Fed is scheduled to meet Sept. 15-16.