What happened
Shares of 3M (MMM 1.16%) are trading 2.8% lower at 10:46 a.m. ET on Thursday morning on no company-specific news, but a hotter-than-expected producer price index (PPI) reading had investors concerned about further aggressive Federal Reserve interest action.
Cleveland Fed bank president Loretta Mester was reported as saying she saw a "compelling" case for more interest rate hikes to combat inflation. While the Fed ultimately raised rates by only a quarter of a percentage point at its last meeting, Mester thought a half-percentage-point increase would have been more appropriate.
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So what
After U.S. wholesale prices jumped 0.7% in January, the biggest rise in the PPI since last June and far greater than the 0.4% rise economists were looking for, Mester's forecast for the need for additional interest rate action is likely to play out in the coming months.
That's going to drum up fears of a Fed-induced recession once more, which is weighing heavily on industrial stocks like 3M. The Dow Jones Industrial Average is down 239 points this morning, though that's a drop of less than 1% in the index.
Key Data Points
Now what
3M has been struggling for some time now, and it's not just poor economic news that's cowed the maker of Post-it Notes. Several lawsuits with potentially damaging consequences hang over the company, and business is slowing. It forecasts adjusted sales will fall between 2% and 6% and profits will decline by around 15%.
An economy forced to cool off can only portend worse results in the future, though investors can take solace in this Dividend King's better-than-50-year history of raising its dividend, which currently yields 5.2% annually.
