US stocks recovered on Friday after August consumer price data matched expectations, breaking a four-session losing streak that had been driven by surging oil prices and hotter wholesale inflation. Futures pointed higher before the open, and the report gave investors the first piece of good macro news in more than a week.
The Labor Department reported consumer prices rose 0.4% on the month and 3.4% year on year, in line with the Dow Jones economist consensus. Core CPI, which strips out food and energy, rose 0.2% on the month and 2.4% annually, also matching forecasts. Markets had been braced for worse after Thursday’s producer price index jumped 0.4% on the month and 5.4% year on year, a print that sent the two-year Treasury yield up roughly 15 basis points to a more than two-year high.
The week that was
The week’s damage came mostly from energy. Brent crude pushed through $101 on Tuesday, $104 on Thursday and touched $105 before easing Friday. US oil topped $100 a barrel, a level last traded years ago, and the rise in energy costs fed directly into fixed income, with Treasury yields setting fresh 52-week highs across the curve. The Dow and Russell 2000 both fell as the oil complex climbed, and stocks had finished lower for four straight sessions going into Friday. The 10-year Treasury yield also hovered near two-decade highs, a level that pressures everything from mortgages to corporate borrowing.
Table: the week’s key readings
| Indicator | Reading | Context |
|---|---|---|
| Brent crude | above $104 | up from roughly $95 in early September |
| August PPI | +0.4% m/m, +5.4% y/y | hotter than expected |
| August CPI | +0.4% m/m, +3.4% y/y | in line with consensus |
| Core CPI | +0.2% m/m, +2.4% y/y | in line with consensus |
| 2-year yield | more than two-year high | jumped about 15bp on Thursday |
| Gold | near $4,429/oz | plunged on rising yields |
Rates desk commentary captured the mood midweek: surging oil sparked a significant move in rates and fixed-income markets, with the knock-on effects behind both the equity selloff and a sharp plunge in precious metals. Gold, which had been sitting near record territory after weeks of record hedge-fund buying, dropped hard as higher yields made non-yielding bullion expensive to hold. Descriptions of the gold trade noted the sector had swung from underowned to a crowded long within weeks, leaving it exposed to exactly the kind of yield shock that arrived this week.
The oil move traces back to the US-Iran conflict, which has escalated in rounds over the past two weeks. American forces launched fresh strikes, Tehran retaliated, and each exchange pushed crude higher despite US officials pointing to robust flows through the Strait of Hormuz, including 17 million barrels exiting the waterway in a single day. The market is pricing disruption risk, not current flows.
What the Fed does next
All of it feeds the Federal Reserve’s September 15-16 decision. Markets had ramped the implied probability of a 25-basis-point hike next week to roughly 70% by Thursday, up from about 40% a week earlier, according to rates-market commentary. Governor Christopher Waller had signaled on September 3 that he would support holding rates if inflation behaved, while leaving the hike on the table if it did not. Wall Street rallied sharply on that comment at the time, and it has been repricing in the other direction ever since the PPI landed.
Friday’s CPI is exactly the kind of in-line print that gives hold-leaning committee members cover. Core inflation at 2.4% annually is still above the Fed’s target, but the monthly pace of 0.2% is the number committee members watch, and it did not accelerate. The energy pass-through remains the risk: with Brent above $104, another month of oil at these levels would eventually show up in headline CPI regardless of what core does.
Hike pricing should ease somewhat after the report, though few strategists expect the question to be settled before the meeting itself. The Fed has made clear it wants several more months of data before committing either way, and the November midterms add a political dimension to tightening this close to the election, a point analysts have raised repeatedly as probabilities moved.
Global picture and what comes next
Europe and Asia dealt with the same forces. UK GDP grew 0.4% in July, three times the expected pace, a rare piece of good news for Chancellor Reeves as the Bank of England weighs tax rises against sticky inflation. Japanese yields hit fresh multi-decade highs as the Bank of Japan signaled a possible September hike, and European central banks face the same oil-driven inflation impulse. The energy shock is global, and so is the policy question it creates.
With CPI behind them, markets turn to two things. The first is the Fed itself, and how its statement and press conference characterize the balance between an oil shock and core cooling. The second is oil itself, where any de-escalation pulls the inflation impulse out of the market and would likely extend Friday’s relief. Further escalation does the opposite.
The earnings picture is quiet this week, so macro dominates. For equity investors the arithmetic is simple: every $10 move in Brent translates into real pressure on both consumer spending and corporate margins, and the Fed’s reaction function is now the single biggest variable across asset classes. Friday’s CPI did not resolve that, but it bought the market a breather heading into the decision weekend.