It has been a week where inflation took centre stage here on Wall Street. Consumer prices came in hotter than expected. Bond yields are hovering near their highest levels in more than two decades. And traders are now betting that the Federal Reserve could raise interest rates once again before the year is out. Joining me is Eric Criscuolo, Market Strategist at the NYSE. Eric, thanks so much for being with us today.
Anytime Johnny. Pleasure to be here.
Consumer prices rose 3.7% from a year ago in September — a little hotter than expected. How worried should investors be?
It was a very interesting day yesterday. The CPI came in hot — a little hotter than expected on the core, which is what everyone was focused on. You saw what initially was a very strong reaction in Treasury yields — they jumped higher on the thought that the Fed might hike in October. But what happened over the course of the day is markets actually recovered. By end of day the probability of an October hike was around 31%, down from about 58% earlier in the morning. What happened was there was a lot of short covering in Treasuries, yields moderated a bit, and the market started to look through a one-month hot print and think December is more likely.
The Dow is up while the Nasdaq is down. What does that rotation tell us?
It tells you that investors are moving money from pricey tech names — growth stocks that get hit hardest in a rising rate environment — into steadier, old economy companies like industrials that carry more weight in the Dow. The AI trade has been the big driver of market performance this year, and when rates go up, the market starts to question those sky-high valuations. You are also seeing chipmakers slide, which drags on the broader S&P. The Nasdaq is down about 1% this morning, building on Wednesday’s worst day since July.
What should investors watch for the rest of the week?
The PPI report will be really important — that tells us what businesses are paying for goods before they reach store shelves. If producer prices are also running hot, it tells us inflation is not just energy, it is spreading into services. Retail sales will tell us how the consumer is holding up. And bank earnings are just getting started — that will tell us something about credit quality and whether higher rates are starting to bite on the lending side. Lots of data and the picture should be clearer by the end of the week.
Eric, thank you so much for joining us.
Thanks for having me.
