Oil Jumped, Yields Followed, Stocks Held Together — CPI Decides the Next Move
The tape did exactly what it was supposed to do today. It just didn’t do it as violently as it could have.The S&P 500 closed at 7,591.70, down 0.6%. The Dow finished at 52,064.10, also down 0.6%. The Nasdaq dropped 0.7% to 26,081.72. That is four straight down days for the S&P and another session where energy was the only real bid. Not a crash. Not a washout. Just a market paying the price for higher oil and higher discount rates.
WTI ripped about 8% and settled near $104. Brent printed above $108 at one point. The 10-year yield jumped to roughly 4.95%, its highest since October 2023. PPI this morning was a modest miss to the hot side on the year-over-year print. Traders now put the odds of a Fed hike next week at around 70%.
The driver is the same one that has been hanging over everything since February: the Iran conflict, Hormuz, Houthi activity, and now a sharp drop in Saudi output. Add Trump saying a deal is not coming soon, a disappointing Treasury buyback, and talk of a $5,000 “dividend,” and the bond market had plenty of reasons to sell. Equities could have been much worse. They weren’t. That is the honest read of the session.
A few names still showed some spine. Apple bounced after yesterday’s foldable iPhone launch. Alphabet (GOOGL) finished green while the Nasdaq was red. The stock has already given back a chunk of its earlier run on capex and regulatory headlines. Today it got a lift from the Finland AI infrastructure package — about $15 billion plus Google’s first nuclear power deal. Power is the new bottleneck for AI buildout. Locking that in matters more than another generic “AI spend” headline. Cloud growth last quarter was also strong enough that the market is still willing to give Alphabet the benefit of the doubt versus the more rate-sensitive names. That is the setup for Friday.
What tomorrow’s CPI actually has to do
August CPI drops at 8:30 a.m. ET. This is the last major print before the September 16 FOMC.
Consensus is clustered around: Headline: 0.3–0.4% month-over-month, 3.3% year-over-year (July was 3.4%)
Core: about 0.2% month-over-month, 2.4% year-over-year
Energy is going to make the headline look worse. That is already baked in. The market will look through gasoline and focus on core, services, shelter, and whether oil is leaking into the rest of the basket.
An acceptable print is core at 0.2% or softer, with the year-over-year rate still drifting toward 2.4%. A 0.1% core number would be genuine relief — yields could give back a good chunk of this week’s move, and hike odds would come down. A 0.3% core print, or a firm 0.25% that rounds the wrong way and is driven by services rather than just airfares, is the one that turns today’s orderly decline into something uglier.
Composition will matter as much as the headline. Sticky rents and core services are the problem. A hot energy line by itself is not.
The market already sold bonds and marked hike odds higher ahead of the number. That means a clean, in-line-to-soft core print can still produce a bounce. A hot one confirms the energy shock is feeding through and gives the Fed less room to sit still next week.
Today was a warning shot, not a breakdown. Tomorrow will tell us whether it stays that way.
See you in the morning. It will be a big day.