Stocks Plummet as Wholesale Inflation Jumps 0.9%, Lennar, D.R. Horton, LGI Homes, Enphase, and EVgo Shares Fall

Lennar, D.R. Horton, LGI Homes, Enphase, and EVgo shares plummeted in the pre-market session due to a sharp rise in wholesale inflation, fueling concerns about rising costs and corporate profits. The July 2025 Producer Price Index jumped 0.9%, the most significant monthly increase in over three years, with tariffs cited as a key factor. This complicates the Federal Reserve's interest rate decisions and creates a headwind for cyclical sectors like Industrials.

Lennar, D.R. Horton, LGI Homes, Enphase, and EVgo shares plummeted in the pre-market session on July 2, 2025, following a sharp rise in wholesale inflation. The July 2025 Producer Price Index (PPI) jumped 0.9%, the most significant monthly increase in over three years. This surge, largely driven by tariffs, has sparked concerns about rising costs and corporate profits, creating a headwind for cyclical sectors like Industrials.

The Labor Department reported that the PPI, which measures inflation before it reaches consumers, rose 0.9% in July, the largest monthly increase since March 2022. This increase was much higher than economists had expected. The core PPI, which excludes volatile food and energy prices, also rose 0.9%, the largest month-over-month increase since March 2022. Compared to a year earlier, wholesale prices rose 3.3%, with core wholesale prices rising 3.7% [1].

The surge in wholesale inflation is particularly concerning because it signals that higher prices for consumers may be on the horizon. While some businesses have absorbed the cost of tariffs to avoid passing them on to customers, this may not last. Economists predict that producers will eventually pass their higher tariff-related costs onto consumers [1].

The rise in wholesale inflation also complicates the Federal Reserve's interest rate decisions. After an ominous July jobs report, the central bank was widely expected to cut interest rates at its meeting next month. However, the latest PPI report suggests that the Fed may need to reassess its stance. Carl Weinberg, chief economist at High Frequency Economics, wrote that the report is a strong validation of the Fed's wait-and-see stance on policy changes [1].

The surge in wholesale inflation is particularly concerning for cyclical sectors like Industrials, which are sensitive to changes in input costs. Companies in these sectors may struggle to maintain their profit margins as they face higher costs. This could lead to a slowdown in spending and investment, further complicating the economic outlook.

For investors, the sharp rise in wholesale inflation highlights the importance of staying informed about macroeconomic trends. While the immediate impact on stock prices may be uncertain, the long-term implications for corporate profits and the economy are clear. As the Federal Reserve grapples with the implications of the latest PPI report, investors should be prepared for potential market volatility.

References:
[1] https://finance.yahoo.com/news/u-producer-prices-surge-july-123748455.html