Rising Yields Fuel Inflation
US Stocks Fall as Rising Oil Prices and Treasury Yields Fuel Inflation Concerns
Anonymous
Key Points
1
The ISM manufacturing gauge slipped 0.1 point to 54.5, but factory activity remained in expansion for a ninth consecutive month—the longest such stretch since 2022.
2
The manufacturing report’s prices-paid index rebounded sharply to 77.9. Capital Economics’ Thomas Ryan said the jump “won’t provide much reassurance to Fed officials.”
3
Ahead of the payrolls report, US companies announced the fewest September job cuts since 2022, while weekly jobless claims fell to their lowest level since July.
4
A Wall Street Journal report that the US was sending a third aircraft-carrier strike group to the Middle East helped spur the oil rally; Brent crude gained more than 4% to close at $102.31 a barrel.
5
Recent US inflation readings were softer than anticipated: August headline PCE rose 0.3% month over month against a 0.4% forecast, while annual headline inflation slowed to 3.4%, below the 3.7% consensus estimate.
U.S. stocks ended mixed Thursday as investors braced for higher interest rates and surging oil prices. The S&P 500 rose 0.2% to break a three-day losing streak, but energy costs and Treasury yields posed headwinds for the broader market. Brent crude jumped 4% to $102.31 a barrel after the U.S. announced plans to send a third aircraft-carrier strike group to the Middle East, according to the Wall Street Journal.
The 10-year Treasury yield climbed to levels not seen since 2002, raising borrowing costs across the economy. At the same time, a report on factory costs triggered fresh inflation concerns. Minneapolis Fed President Neel Kashkari said the interest rate level needed to control inflation remains unclear, signaling the central bank may hold rates steady longer than markets hoped.
Factory Prices Jump Despite Modest Growth
U.S. manufacturing activity expanded for a ninth straight month in September. The ISM manufacturing gauge slipped just 0.1 point to 54.5, staying well above the 50-point threshold that signals expansion. This marks the longest expansion streak since 2022, according to the ISM report.
But the real alarm came from factory input costs. The prices-paid index rebounded sharply to 77.9, reversing weakness from August. Capital Economics analyst Thomas Ryan said the jump "won't provide much reassurance to Fed officials" worried about persistent inflation driving up consumer prices.
Oil Surge Tied to Middle East Military Buildup
The U.S. decision to deploy a third aircraft-carrier strike group to the Middle East sent crude prices soaring. The Wall Street Journal reported the announcement sparked the oil rally, with Brent crude gaining more than 4% to close at $102.31 a barrel. Geopolitical tensions have kept energy markets on edge all year.
Higher oil prices threaten to reignite inflation and keep the Federal Reserve hesitant about cutting interest rates. Energy-driven inflation has already pushed Treasury yields up sharply. The 10-year yield now sits near 2002 levels, making borrowing more expensive for businesses and consumers alike.
Labor Market Shows Signs of Strength Ahead of Jobs Report
The jobs market appeared resilient as of Thursday. U.S. companies announced the fewest September job cuts since 2022, while weekly jobless claims fell to their lowest level since July. These data suggested employers remained hesitant to slash payrolls despite economic uncertainty.
Investors now await Friday's September jobs report, which economists expect to show modest job growth and steady unemployment at 4.1%. Stock futures were flat Wednesday night as traders positioned ahead of the release. Any major surprise could shake markets already rattled by inflation worries and rising yields.
Inflation Softens, But Factory Costs Stir Doubts
Recent inflation readings offered some hope. August headline PCE rose just 0.3% month over month, beating the 0.4% forecast. Annual headline inflation slowed to 3.4%, below the 3.7% consensus estimate. These softer-than-expected numbers suggested price growth was moderating.
But manufacturing's sharp rebound in input costs muddied that picture. Minneapolis Fed President Kashkari warned the rate level needed to tame inflation remains uncertain, hinting the Fed may stay cautious. Investors fear energy-driven inflation could reverse recent progress and keep the Fed on pause longer than hoped.
Sentiment
Mostly NegativeNEGATIVENEUTRALPOSITIVE
Publishers
22
Articles
19
Reach
41
A
AnonymousAuthor
