A worker arranges peaches at a fruit stand at Pike Place Market on Thursday, July 4, 2024 in Seattle, Washington, USA.
Cho Sung Joon | Bloomberg | Getty Images
This report is from today’s international market newsletter CNBC Daily Open. The CNBC Daily Open provides investors with everything they need to know, no matter where they are. See what you see? You can subscribe here.
What you need to know today
Inflation higher than expected
The U.S. consumer price index rose 0.2% in September, bringing the annual inflation rate to 2.4%, according to the Labor Department. Both numbers are 0.1 percentage point higher than the Dow Jones consensus. Still, the year-on-year comparison is the lowest since February 2021. Core inflation, which excludes food and energy prices, also exceeded expectations.
too hot for market comfort
Major US indexes fell on positive CPI report. of S&P500 It fell by 0.21%. Dow Jones Industrial Average down 0.14%, Nasdaq Composite It fell by 0.05%. pan-european Stoxx600 index It fell by 0.18%. According to the German government, Germany’s gross domestic product (GDP) is expected to fall by 0.2% this year, marking the second year-on-year decline.
Banks are not yet clear
Lower interest rates tend to favor banks. Lower yields on money market funds and other assets slow the flow of cash from bank accounts. While this lowers banks’ funding costs, the yields on their income-producing assets do not fall as quickly. But this time, those expectations may not be so perfectly met.
AMD announces new AI chip
AMD announced Thursday its new artificial intelligence chip, the Instinct MI325X. Nvidia’s blackwell chips. Both are essential graphics processing units for large-scale language models that generate AI systems. If AMD’s chips are seen as a viable alternative to Nvidia, that could put price pressure on the latter.
(PRO) Positive signs in CPI report
Yesterday’s CPI report may have disappointed the market with hotter than expected numbers. But if you read between the lines, there’s more to the report than just a silver lining, writes CNBC Pro Fred Imbert.
conclusion
When inflation is high, interest rates need to be raised to dump cold water on the economy and slow it down.
Atlanta Fed President Rafael Bostic agrees. “I’m totally comfortable skipping the[rate-cutting]meeting if the data suggests it’s appropriate,” Bostic said in an interview with The Wall Street Journal on Thursday. said in an interview Thursday.
The data suggests so. The September employment statistics and consumer price index both came out better than expected. “To me, this volatility is along the lines of maybe there should be a pause in November,” said Bostic, a voting member of the Federal Open Market Committee.
But Bostick acknowledged that it’s important to see if the individual data points are part of a larger pattern, or if they’re just “junkies,” as Bostick said.
The futures market seems convinced that the data is volatile. After understanding the CPI report, traders increased their bets on a rate cut, according to the CME FedWatch tool.
They currently believe there is an 80.3% to 83.3% chance that the Fed will cut rates by a quarter of a percentage point at its November meeting. The increase in stakes is small. However, the implications are significant. Even after the CPI report, markets still seem more concerned about a slowing economy than about inflation remaining high.
That concern could be exacerbated by the number of jobless claims for the week ending Oct. 5. Unemployment claims rose by 33,000 from the previous week to 258,000, the highest in more than a year.
But this number can also be junky. “This morning’s spike in jobless claims was linked to hurricane-related distortions and was the culmination of distortions in important economic indicators in the near term,” said RSM Chief Economist Joseph Brusuelas.
Given that “economic indicators that matter in the near term” are generally going to be volatile and distorted, perhaps the best thing we can do is sit through this mess.
– CNBC’s Jeff Cox, Samantha Subin and Hakyung Kim contributed to this article.