Hot PPI, Solid Retail Sales Lift Yields

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Hot PPI, Solid Retail Sales Lift Yields

1.30 Producer Price Index0.80 Retail Sales0.70 Core PPI Month-over-Month25.50 NY Empire State20.90 Philadelphia Fed

S&P 5007,744.06+0.33%

US 10Y Treasury5.10%-9 bp

WTI Crude96.06-1.95%

Gold4,198.80+0.69%

Market Snapshot

Asset	Level	Change
S&P 500	7,744.06	+0.33%
Nasdaq 100	29,935.60	-0.05%
Dow Jones	52,177.69	+1.08%
Russell 2000	2,767.27	+1.38%
USD/JPY	157.96	-0.23%
EUR/USD	1.13	+0.59%
GBP/USD	1.33	+0.82%
Gold	4,198.80	+0.69%
WTI Crude	96.06	-1.95%
Bitcoin	82,107.24	-0.04%
US 2Y Treasury	4.77%	-5 bp
US 10Y Treasury	5.10%	-9 bp

Prior Economic Events

Data	Prior	Cons	Actual
Speech by Fed's Bowman	-	-	-
Producer Price Index Month-over-Month	0.50	0.50	1.30
Retail Sales Month-over-Month	1.30	0.30	0.80
Core PPI Month-over-Month	0.20	0.30	0.70
NY Empire State Manufacturing Index	7.60	10.30	25.50
Philadelphia Fed Manufacturing Index	37.80	28.40	20.90
Retail Sales Control Group Month-over-Month	1.20	0.30	0.10
Retail Sales Excluding Autos Month-over-Month	1.40	0.50	0.90
Weekly Jobless Claims	198,000	200,000	199,000
Business Inventories Month-over-Month	0.90	0.40	0.40

Today's Economic Events

Data	Prior	Cons	Time
Export Prices Month-over-Month	0.60	1	08:30
Import Prices Month-over-Month	0.70	0.80	08:30
Industrial Production Month-over-Month	0	0.40	09:15
Monthly Budget Statement	-167,000m	-29,000m	14:00
Net Long-term TIC Flows	-27,900m	75,200m	16:00

September PPI surged 1.3% m/m, double consensus, with core at 0.7% as energy costs filter through
Retail sales rose 0.8% m/m, beating 0.3% estimates; control group cooled to 0.1%
10-year yield eased 9 bp to 5.10%; S&P 500 gained 0.33% as rotation favored cyclicals

Yesterday's Recap

US markets absorbed a heavier-than-expected inflation print alongside robust demand data. Producer prices jumped 1.3% m/m against a 0.5% consensus, while core PPI ran 0.7% versus 0.3% expected — evidence that the energy shock is now passing through to pipeline costs. Retail sales advanced 0.8% m/m, well above the 0.3% consensus, though the control group, which feeds GDP calculations, slowed sharply to 0.1% from 1.2% prior.

Regional manufacturing surveys diverged: the Empire State index surged to 25.5 from 7.6, while Philadelphia Fed activity cooled to 20.9 from 37.8, both remaining solidly in expansion. Jobless claims held at 199,000, underscoring labor-market resilience. Equities finished mixed but constructive — the S&P 500 added 0.33% to 7,744.06, the Dow rallied 1.08%, and the Russell 2000 outperformed at +1.38%, signaling rotation into domestic cyclicals — while the Nasdaq 100 slipped 0.05%.

Treasuries stabilized after recent volatility, with the 10-year yield easing 9 bp to 5.10% and the 2-year down 5 bp at 4.77%. WTI crude fell 1.95% to $96.06 after a large 8.6 million barrel crude inventory draw reversed expectations.

The Day Ahead

Today's calendar is light on tier-one data, leaving markets to digest yesterday's inflation surprise and Fed commentary. Attention turns to any follow-through from Chair Warsh's evening remarks on price stability and the AI-driven economic transformation. Export price data due this morning will offer a read on how much of the energy move is flowing through trade channels.

Traders will monitor the University of Michigan sentiment preliminaries and housing-related releases if scheduled, alongside continued positioning ahead of next week's heavier data flow. With the 10-year yield stabilizing near 5.10% in Asian trade, focus shifts to whether the bond market has found footing after the recent backup. Equity investors will watch whether the rotation from AI mega-caps into healthcare and value persists for a second session.

The dollar firmed against majors, with EUR/USD at 1.13 and GBP/USD at 1.33, and further direction hinges on rate-differential dynamics.

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Other Economic Notes

The Atlanta Fed's GDPNow tracker held at 3.6% annualized for the fourth quarter, confirming that growth momentum remains well above trend even as the economy absorbs an energy price shock. Business inventories rose 0.4% m/m, in line with consensus, suggesting stockbuilding is neither accelerating nor dragging on activity. The combination of 3.7% CPI inflation, 4.2% unemployment, and 6.3% year-over-year retail sales growth paints a picture of an economy running hot — Axios dubbed it "too-hot-for-comfort." Analysts are increasingly flagging stress beneath the surface: the cost of insuring Wall Street tech titans' debt has hit record levels, and a 30-year market veteran warns the record-chasing S&P 500 masks valuation extremes even as a "monstrous bull market" develops in unloved corners.

Global Macro News

Global crosscurrents are complicating the US outlook. Ambassador Sergio Gor indicated the US and India are close to landing a trade deal, a potential positive for tariff-exposed supply chains. Canada faces a double squeeze from US tariffs and elevated energy prices, while the UK grew just 0.1% in August — a beat, but one that underscores sluggish momentum against sticky inflation and surging energy costs.

The energy shock is a global phenomenon: Brent-linked pressures are filtering into US producer prices and complicating central-bank calculus on both sides of the Atlantic. Gold extended gains, rising 0.69% to $4,198.80, reflecting persistent hedging demand. Bitcoin was flat at $82,107, and USD/JPY eased 0.23% to 157.96 as Treasury yields stabilized.

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Continuation

Global Macro News (continued)

In emerging markets, Nigeria's FAAC disbursed NGN 2.43 trillion to tiers of government, while the naira held steady against the dollar.

Fed Watch

Chair Warsh's Thursday evening remarks vowed price stability while warning that AI represents a "shock" reshaping the economy — the most consequential structural change in decades — with a "bumpy" transition ahead. His framing suggests the FOMC sees technological disruption as complicating both the inflation outlook and the neutral rate. With the funds rate at 3.88%, the committee's task is complicated by an energy shock passing through pipeline prices: yesterday's 1.3% PPI print and 0.7% core give hawks ammunition to delay further easing.

Cleveland Fed's Hammack and Governor Bowman also spoke, with markets parsing their language for hints on the pace of balance-sheet runoff and the timing of the next move. Bloomberg notes the energy shock "complicates the Fed's job" as businesses pass along rising costs. The stabilization in long-end yields near 5.10% suggests markets have largely priced a slower easing path; the 2s10s spread at 33 bp remains flat-to-slightly positive, consistent with a committee pausing to assess whether energy-driven inflation proves transitory or entrenched.

Watch for any follow-up guidance clarifying whether December action remains live.

US Macro Daily(Beta Mode)