Hot PPI and Strong Retail Sales; Dow Gains 550
Wholesale inflation came in hot while retail sales doubled expectations. Alex and Jordan break down the PPI, the Fed's next move, and why the Dow jumped 550 points.
Speaker 1: It was a wild day for economic data, and Wall
Street gave us a surprise ending. The Dow closed up
550 points, even as inflation came in hotter than expected.
Speaker 2: Let's start with the inflation numbers, because they were eye-catching.
What did wholesale prices show?
Speaker 1: The producer price index rose 1.3% in September, the largest
monthly jump since March of 2022. Economists had expected just 0.6%.
On a yearly basis, wholesale inflation hit 6.3%. up from 5.4%
in August.
Speaker 2: And core inflation?
Speaker 1: Also hot. Core PPI rose 0.7% for the month and
5% for the year. After Wednesday's hot consumer price report,
which came in at 3.7%, traders are now pricing in
a 29% chance the Federal Reserve raises rates at its
meeting in two weeks, and an 88% chance of a
hike by December.
Speaker 2: But you said the Dow ended up 550 points. How
does that work with such ugly inflation data?
Speaker 1: Rotation. Investors are dumping tech stocks and piling into everything else.
The Dow advanced 1.1% on gains from companies like Nike, Salesforce,
and Home Depot. The S & P 500 rose 0.3%,
and the Nasdaq actually erased steep losses to finish up 0.1%.
Speaker 2: So it's really a story of money moving, not new optimism.
Speaker 1: Exactly. The concern driving the sell-off is the level of
debt companies have taken on to fund the AI build-out.
The AI trade looks set for another rough day, as
one report put it. The 10-year Treasury yield fell to 5.09%
after spiking to 5.36% on the hot CPI reading. Investors
seem to be shifting from inflation fears to worries that
high borrowing costs will hurt the economy.
Speaker 2: What about retail sales? That was the other big number
this morning.
Speaker 1: Strong. Retail sales rose 0.8% in September to $ 745 billion,
roughly double what economists expected. Excluding autos, sales were up 0.9%.
The consumer is still spending, though higher gasoline prices are
doing some of the heavy lifting.
Speaker 2: And the jobs data?
Speaker 1: Weekly jobless claims came in at 199,000, basically matching expectations
and staying under 200,000. The labor market still looks resilient.
The Empire State Manufacturing Index also jumped to 25.5 from 7.6
in September, way above forecasts.
Speaker 2: What about overseas markets? I saw something dramatic about South Korea. Yes.
Speaker 1: South Korea's KOSPI plunged another 7.5% overnight, leaving it down
20% over the past seven trading days. That's the worst
seven-day stretch since the COVID panic of March 2020. The
chip-heavy index is getting crushed by the global AI sell-off.
Speaker 2: And Bitcoin?
Speaker 1: Bitcoin slipped to around $ 81, 000, down nearly 3% over 24
hours after the hot PPI data. Gold, meanwhile, is holding strong.
Futures up to about $ 4, 165 an ounce. Classic risk-off behavior.
Speaker 2: So the takeaway for listeners?
Speaker 1: Inflation is running hotter than anyone wanted. The Fed may
have to hike again, and the market's response is to
sell the AI darlings and hide in old economy stocks.
Retail sales show Americans keep spending, but the bond market
is flashing warning signs. It is not a comfortable picture
heading into the Fed's next meeting.