All Eyes on Powell as Markets Struggle Amidst August CPI Report

Good Evening,

Markets had a treacherous week following the hotter-than-expected August CPI print, with major indexes posting their worst weekly performances in months. Following Tuesday’s CPI release, the Nasdaq 100 went completely “no-bid”, all 30 stocks in the DJIA declined, as did all 11 sectors in the S&P 500. Yields propelled higher with the 2Y yield rising to 3.86% and the 10Y closing the week at 3.45%. All eyes remain focused on next week’s FOMC meeting, where it is expected that the central bank will raise rates another 75bps. The Bank of England and Bank of Japan are due to announce their monetary policy decisions next week as well, opening up the potential for increased volatility. Shares of FedEx tumbled after the shipping giant warned of a slowdown in deliveries, due to macro headwinds. 

Friday brought some good news, with the University of Michigan inflation expectations survey showing expectations for future inflation declining. Median long-term (5-10 year) inflation expectations came in at 2.8%, down from the 2.9-3.1% range for the first time since July 2021. Expectations for 1 year inflation dropped to 4.6% from 4.8% a month prior. The latest UMich data may ameliorate concerns that high inflation expectations would become entrenched as they...