From Kiplinger · · 2m
Oil at $100 and a Fed hike back on the table
Hot producer prices and an eight-day oil surge pushed the 10-year yield to 4.96% and knocked stocks down a fourth straight day.
In brief
Hot producer prices and an eight-day oil surge pushed the 10-year yield to 4.96% and knocked stocks down a fourth straight day. Energy prices are now driving the inflation story, and traders think that tips next week's Fed decision toward a hike. Originally reported by Kiplinger.
Stocks slide, yields spike
A hot inflation reading and surging oil sent Treasury yields up hard on Thursday, days before the Fed meets. All three major indexes closed lower.
Producer prices ran hot
The PPI rose 0.4% from July to August and 5.4% year over year. Faster than the month before, though it matched what economists expected.
Core inflation looks sticky
Stripping out food and energy, prices rose 0.2% on the month, a touch slower than July. But the yearly rate climbed to 4.6% from 4.2%.
Blame the Iran war
Fifth Third economist Bill Adams tied the hot print to energy costs as the conflict disrupts global supply. And the worst of it came after the data was collected.
“August's hot PPI was largely as expected, lifted by rising energy prices as the Iran war disrupts global supplies”
Eight straight days of oil gains
WTI crude jumped 6.7% to $102.48 a barrel, its longest winning streak since 2023. Diesel hit a record $5.9773 a gallon.
The Fed coin flip tipped
Traders now price a 71% chance of a quarter-point hike next Wednesday, up from 61% a day earlier. Friday's CPI or an Iran deal could still swing it.
“September's surge in energy prices will likely tip the balance towards a hike”
Yields at multi-year highs
The 2-year closed at 4.579%, its highest since mid-2024. The 10-year rose to 4.963%, a level it has not seen since 2023.
Mega caps cushioned the fall
The Dow lost 0.6% to 52,064, the S&P 500 fell 0.6% to 7,591 and the Nasdaq dropped 0.7%. Gains in Apple, Alphabet and SpaceX kept it from being worse.
Drones up, Oracle down
AeroVironment rose 4.5% on a strong quarter that Stifel called its cleanest print in a while. Oracle slid 5.2% ahead of its own results after the close.
“AVAV is finally showing substantial, quality backlog build in its key defense-tech franchises”
A 40% dividend hike ignored
Argan raised its quarterly payout to 70 cents and still fell 1.4%. The power builder is up 29% this year, more than double the S&P 500's gain.
“our industry experiences unprecedented demand for new dispatchable power generation”
The bottom line
Energy prices are now driving the inflation story, and traders think that tips next week's Fed decision toward a hike.
