Stocks Slide as Hot CPI Revives Rate Hike Fears

Remy Blaire: And with midday trade underway, let’s go on to Chicago. FINTECH.TV correspondent Mark Payton joins us live from the trading floor. Good morning to you over in Chicago, Mark. So what activity are you following in midday trade today?

Mark Payton: Hey, Remy. Stocks remain under pressure this morning following that hotter-than-expected inflation report. The S&P 500 is down about 0.7% as investors weigh the possibility of another interest rate increase later this month.

Here at Cboe, the VIX has been relatively contained despite the selling, suggesting investors aren’t anticipating a dramatic increase in market volatility. It is up, though. It’s around the 16 level. We’re also seeing a bigger reaction in the bond market, with the 10-year Treasury yield climbing a little today. Oil is also moving higher, with continued supply concerns in the Middle East.

And we’re seeing some weakness in the financial sector. Bank of America and Morgan Stanley shares are both lower following earnings, while BlackRock is moving higher. So while stocks are under pressure and Treasury yields are rising, we’re not seeing a dramatic spike in market volatility, at least right now, Remy.

Remy Blaire: Yeah. And Mark, all of us are counting down to the October Fed meeting, and we have about 14 days to go here. But when it comes to the odds of a rate hike this month, they are right now below 50%. So what are prediction market traders expecting?

Mark Payton: Yeah, we’re seeing a pretty big shift in expectations following this morning’s inflation report. So according to Reuters, before CPI came out this morning, interest rate markets were putting the probability of an October rate increase at about 22%. Now, following the report, that jumped to around 46%.

And on Polymarket, traders are now putting around a 62% probability on the Fed leaving rates unchanged, compared with 39% for a quarter-point increase. That’s coming after September’s inflation report showed consumer prices rising 3.7% annually, with gasoline accounting for more than half of the monthly increase.

And while energy is a major driver, the Fed still has to consider whether those price pressures could spread throughout the broader economy. Now, what’s interesting is that holding rates steady remains the favorite, but this morning’s inflation report has made another rate increase a much more realistic possibility, Remy.

Remy Blaire: Well, Mark, appreciate your time this afternoon. Of course, we are waiting for those PPI figures that are due out tomorrow at 8:30 a.m. And of course, we’re awaiting Fed Chair Kevin Warsh from the IMF as well. So thank you so much. We’ll continue to watch those prediction markets.

Mark Payton: Thank you.