Category: Market Action

US wholesale inflation picked up:

US wholesale inflation jumped in September to its highest level in more than four years, marking the second hotter-than-expected inflation reading this week and adding to concerns about the economy just weeks before the midterm elections.

The Producer Price Index rose 1.3% from the month before and 6.3% from the year before, according to Bureau of Labor Statistics data released Thursday morning. It’s a sharp upswing from August when wholesale prices rose 0.5% to an annual rate of 5.6%.
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Energy prices, driven higher by geopolitical conflicts including the war with Iran, drove September’s increase, accounting for 80% of the 2.9% leap in goods prices. That’s the largest-ever monthly increase, according to BLS data that goes back to 2009.

However, businesses are contending with price pressures beyond energy. Core PPI, which strips out food and energy, rose at 0.7%, its fastest rate in five months, lifting the annual rate to 5%, its highest since January 2023.

US inflation news was not encouraging:

The Consumer Price Index Report, released by the Bureau of Labor Statistics on Wednesday, showed that overall prices rose 0.6 percent, the largest monthly increase in five months. Compared with the same time last year, prices were 3.7 percent higher.

The bulk of the increase stemmed directly from energy prices, which have shot higher this year because of the war with Iran.
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Gasoline prices, which in late September rose to nearly $4.50 a gallon, surged 9.1 percent for the month. That accounted for more than half of the overall monthly increase in prices. Gas prices are up 34.2 percent over the past year.

Fuel oil prices, used for heating in many homes in the Northeast, have also shot higher, rising 15.3 percent in September, or 74.2 percent on an annual basis. Higher fuel costs have boosted airfares, which were up 1.2 percent in September, or 22.4 percent over the year.

Food prices were flat for the month, but over the past 12 months have risen 2.5 percent.

“Core” inflation, which excludes volatile energy and food prices, edged higher as well, but by a smaller magnitude. Over the course of September, these prices were up only 0.3 percent. Over the past year, they were up 2.6 percent.
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Average hourly earnings, adjusted for inflation, fell 0.5 percent in September, and were down 0.7 percent from a year earlier. It was the sixth straight month of year-over-year declines in real earnings.

This had a fleeting effect on Treasuries:

US Treasuries rallied sharply on Wednesday afternoon, reversing an earlier selloff spurred by the latest hot inflation report and leaving yields on most maturities lower for the day.

The turnaround highlighted an increasingly vigorous debate in the market, centering on accelerating consumer ⁠price data ​on the one hand and a string of comments from Federal Reserve officials on the other suggesting that the central bank is not in a rush to hike rates further to try to tame stubborn inflation.
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On Wednesday morning, trader bets on the probability of a rate hike at ‌the Fed’s October ​27-28 meeting rose to around 40% from just ‌22% ahead of the data. But by late afternoon, bets for a hike this month fell back to about 33%, according to ​LSEG data.
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The 2-year US Treasury yield, which typically moves in step with interest rate expectations for the Fed, rose 0.9 basis points to 4.802% after earlier touching 4.9521%, its highest level since September 29.

The yield on the benchmark US 10-year Treasury note fell 2.7 basis points to 5.19% after hitting 5.3293% in morning trading.

The yield on the 30-year bond fell ⁠4.2 basis points to 5.521%, eying its fourth straight day of declines. Earlier it had ​risen to 5.6277%.

The effect on equities was less fleeting:

Hotter-than-expected U.S. inflation data sent the Nasdaq to a sharply lower close on Wednesday, with worries about more interest rate hikes from the Federal Reserve pummeling shares of Oracle, CoreWeave and other ⁠AI ​stocks sensitive to higher borrowing costs.
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The S&P ⁠500 declined 1.11% to end the session at 7,718.94 points, its biggest one-day drop since July 29.

The Nasdaq declined 1.88% to ​26,692.87 points, its biggest daily drop since July 23. The Dow Jones Industrial Average declined 0.09% to 51,621.48 points.

Canada’s S&P/TSX Composite index also closed in the red, with a loss of 1.11%.
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After hitting a record high last week, the S&P 500 remains up almost 13% in 2026, with most of that gain fueled by AI-related stocks. The median S&P 500 stock has gained 4% in 2026, and over 200 of the index’s components are in negative territory.

PerpetualDiscounts now yield 5.88%, equivalent to 7.64% interest at the standard conversion factor of 1.3x. Long corporates yielded 5.34% on 2026-10-14. Therefore the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has remained constant at the 230bp reported October 7.

The TXPR price index was up 57bp today. Volume was 668,930, a little below the median of the past 20 trading days.

CPD was up 36bp to 14.00, on volume of 65,170 (consolidated: 314,890), a little below the median of the past 20 trading days.

ZPR was up 23bp today on volume of 79,370 (consolidated: 478,310) well below the median of the past 20 trading days.

Jobs, jobs … whoopsy!

Canada’s economy posted a second consecutive month of job losses in September, pushing up the unemployment rate and offsetting what had been a hot streak for the labour market earlier in the year.

Statistics Canada said Friday the economy lost 68,000 positions in September, coming off a loss of 42,000 roles in August. Economists had expected a gain of 9,200 jobs in the month.

Statscan said job losses were nearly evenly split between full- and part-time work and were concentrated in the public sector.

The unemployment rate edged up a tenth of a point to 6.5 per cent last month, back to where it stood at the start of the year in January.
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“Most September losses came from non-trade-facing sectors and from educational services for Quebec in particular, so it would be premature to blame tariffs for the weakness,” said Daniel Hyun, senior economist at KPMG Canada, in a note.

Signs of stability in the private sector – despite four straight months of declines in public sector employment – were also reassuring to economists.
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Average hourly wages rose 2.3 per cent on an annual basis last month, Statscan said, up from 2 per cent in August.

Meanwhile:

The ⁠S&P/TSX Composite Index ended up 519.24 points, or 1.48%, at 35,664.62, marking its highest closing level in two weeks and its biggest advance since September 3. For the week, the ​index added 0.46% after two straight weeks of ‌declines.

Canada’s economy shed 68,300 ‌jobs in ​September and the unemployment ‌rate edged up to 6.5%. Analysts had forecast a jobs gain ​of 9,200.

Investors now ​see a 25% chance the BoC would hike at the October 28 policy announcement, down from 40% before the jobs report.
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The Dow Jones Industrial Average rose 423.31 points, or 0.83%, to 51,654.95, the S&P 500 gained 46.15 points, or 0.59%, to 7,811.51 and the Nasdaq Composite gained 172.83 points, or 0.64%, to 27,366.17.
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Among the 11 major sectors of the S&P 500, communication services was the lone percentage loser.

Elon Musk’s SpaceX struck a deal to acquire a nationwide low-band spectrum portfolio, posing a direct challenge to US wireless companies. Telecom firms T-Mobile US, AT&T, and Verizon dropped between 8.8% and 13.3%.

That negative sentiment for the sector spilled over into Canada. Telecoms fell sharply as investors fretted over what future competition they may face, even though the acquisition of the portfolio doesn’t impact Canada directly. BCE lost more than 5% and Cogeco Communications 7%. The TSX communication services index was down 4.2%. European telecom stocks also tumbled.

The New York Fed has released the September Survey of Consumer Expectations:

September Survey: Inflation Expectations Up at Short- and Medium-Term, Unchanged at Longer-Term Horizons; Labor Market Expectations Mostly Improve

• Median inflation expectations increased by 0.3 percentage point (ppt) at the one-year horizon and by 0.1 ppt at the three-year horizon, to 3.9 percent and 3.3 percent, respectively. This is the highest reading for one-year-ahead inflation expectations since May 2023. Expectations remained unchanged at the five-year-ahead horizon at 3.0 percent.
• Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased by 0.5 ppt to 43.9 percent but remained above the 12-month trailing average of 42.4 percent. The mean perceived probability of losing one’s job in the next twelve months decreased by 0.3 ppt to 13.5 percent, the lowest reading since December 2024.
• The median expected growth in household income increased by 0.1 ppt to 3.1 percent, the highest reading since February 2025. Median one-year-ahead nominal household spending growth expectations increased by 0.3 ppt to 5.5 percent, above the 12-month trailing average of 5.0 percent and the highest reading of the series since May 2023.
• Perceptions and expectations about households’ financial situations both deteriorated, with larger shares of households reporting a worse financial situation compared to a year ago and expecting a worse financial situation a year from now.

PerpetualDiscounts now yield 5.96%, equivalent to 7.75% interest at the standard conversion factor of 1.3x. Long corporates yielded 5.44% on 2026-10-07. Therefore the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed sharply to 230bp from the 250bp reported September 30.

The US jobs number came out today:

The US labor market hit a soft patch in September as the economy added just 29,000 jobs and the unemployment rate increased to 4.2%, new Bureau of Labor Statistics data showed Friday.
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The annual rate of wage growth slowed for the fourth month in a row, landing at 3% in September, which is the lowest since May 2021.
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Healthcare, buoyed by an aging population in need of more medical services, has driven much of the employment gains in recent years and continued to do so in September. Healthcare and social assistance added 23,000 jobs, a modest uptick for a sector that added 57,000 jobs per month last year.
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The construction sector notched employment gains for the seventh month in a row, adding 11,000 jobs. The bulk of the gains came from the non-residential side, a likely reflection of the massive investment in AI-related infrastructure such as data centers.

So bonds did well:

The weaker-than-anticipated data pulled down expectations for a rate hike of at least ​25 basis points from the Fed at its meeting at the ‌end of October to 22.7 per cent, according to CME FedWatch, from 24.4 per cent in the prior session and 64.2 per cent a week earlier.

The cry goes up from the prediction markets and gambling hells … “Buy the dips!”:

A wave of investor buying reversed an early selloff in US Treasuries on Thursday, providing relief to bondholders after long-term yields surged to their highest level in 24 years following the latest hot economic data.

The reversal opened October ⁠on an optimistic ​note following the largest quarterly rise in 10-year yields since 1994, a year known on Wall Street as the great bond massacre. Yields on 10- and 30-year Treasuries hit their highest level since the spring of 2002 at midmorning on Thursday after the Institute for Supply Management said US manufacturing activity was little changed in September, with prices for inputs surging amid strong demand, pointing to sustained inflation pressures.

The early selloff came against ​a deteriorating backdrop for inflation, with benchmark Brent oil prices rallying after China suspended exports of ‌oil products. Earlier data showed that new applications for US unemployment benefits fell last week and layoffs decreased in September, suggesting that labor-market stability persisted even as employers remained cautious about boosting hiring.

But the momentum shifted toward buying bonds shortly after 10 a.m. EDT (1400 GMT), with traders and analysts citing a widespread sense that the sharp rises in yields over the past six weeks have vastly improved the risk/reward profile on US Treasury debt. On Thursday afternoon, benchmark yields were on track for their ‌biggest drop in ​two weeks after dovish comments from Federal Reserve ‌officials.
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Some of the strongest buying occurred in 2-year Treasuries, with yields marking their biggest declines in a single session since August 2025. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, was last down 8.94 basis points at 4.798%.
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The yield on benchmark U.S. 10-year notes fell 5.02 basis points to 5.243% after earlier trading at 5.3445%, their highest level since April 2002.

The 30-year bond yield fell 3.21 basis points to 5.6069% after earlier reaching 5.6935%.