Yields decline as markets shift risk-off. Treasury yields declined across the curve today as concerns surrounding AI debt triggered a shift to safe-haven assets. The 2-year yield closed 6 bps lower at 4.74%, while the 10-year yield closed 13 bps lower at 5.06%. Meanwhile, equities edged higher after sliding for three days, with the S&P 500 and NASDAQ closing 0.33% and 0.08% higher, respectively.
Headline PPI hits four-year high. PPI data today showed a broad-based rise in producer prices as headline PPI rose 6.3% YoY and 1.3% MoM, well above expectations of 5.4% and 0.6%, respectively. Excluding food and energy, core PPI increased 5.0% YoY and 0.7% MoM, also above forecasts of 4.4% and 0.3%. Rising prices in September were largely driven by a 10.8% jump in energy prices as gasoline surged 20.3%. Chris Osmond, chief investment officer at Fifth Third Wealth Advisors, explains “Today’s data reinforce a challenging economic crosscurrent: inflation is heating up, the consumer is still spending but with less underlying momentum and the labor market appears frozen rather than broken.”
Gas prices drive surprise retail sales jump. Headline retail sales increased 0.8% MoM in September, well above estimates of a 0.3% rise but below August’s downwardly revised 1.3% gain. However, the figures, which are not inflation-adjusted, were driven largely by higher oil prices, as gas station spending jumped 6.4% for the month. Excluding auto and gas, retail sales rose just 0.2% MoM, though eight of thirteen categories posted increases, led by furniture, electronics, and restaurant spending. EY-Parthenon economists Lydia Boussour and Gregory Daco said, “The broader picture remains one of consumer resilience, but the inflation squeeze is becoming more visible,” adding that consumers “lost momentum after showing strong spending appetite in August.”
