Wholesale Prices Hit A Four-Year High And The Fed Said Nothing

U.S. wholesale prices rose in September at their fastest monthly pace since March 2022, gasoline did most of the work, and late Thursday night the Fed chairman would not say what it means for the meeting two weeks away. Government borrowing costs fell anyway, and the dollar slipped to a two-week low. Overseas, Indonesia's stock market fell as much as 11% after MSCI, which builds many of the world's stock indexes, warned it may not belong in them.

Fast Facts

• Retail sales beat expectations in September, helped by the gasoline prices that drove wholesale inflation (Read More)
• Jobless claims came in at 199,000 for the week through October 10, up 1,000 and snapping a five-week decline (Read More)
• KFC is moving thousands of its U.S. restaurants from Pepsi to Coke, costing PepsiCo more ground in the soda wars (Read More)
• Meta released Muse Spark Open, an AI model built with Apple that runs on Apple silicon Macs rather than in a data center (Read More)
• Penske and Mitsui will take Penske Automotive Group private for about $4 billion (Read More)
• Geothermal power is drawing investment and bipartisan support at once as AI data centers push up electricity demand (Read More)

Global News

• The rupee rose to 94.79 against the dollar in early trade after the Reserve Bank of India stepped in (Read More)
• The International Energy Agency is speeding up releases from emergency oil stockpiles, including more than 20 million barrels of diesel (Read More)
• Eurozone trade swung to a deficit in August, pushed there by higher energy imports and weaker machinery and vehicle trade (Read More)
• HSBC said it will double its Hong Kong artificial-intelligence team to 300 people, more than it has planned for its new Singapore center (Read More)

Wholesale Inflation Hit A Four-Year High, And Warsh Would Not Say What The Fed Will Do About It

The producer price index, the Labor Department's measure of what businesses receive for what they sell rather than what shoppers pay at the register, rose 1.3% in September from August. The release calls that the largest monthly advance since March 2022, when the figure rose 1.7%. Over the twelve months ended in September the index was up 6.3%. For scale, consumer prices rose 0.6% in September and 3.7% over twelve months. Energy is most of the story: it rose 10.8%, more than 80% of the rise in goods prices, with wholesale gasoline alone up 20.3%. Services rose 0.8%. The Wall Street Journal reported economists had expected a 0.6% headline rise.

Rates went the other way on Thursday. The yield on the 10-year Treasury note, what it costs the federal government to borrow for a decade, closed at 5.10%, down 9 basis points, or 9 hundredths of a percentage point. The 2-year note, which tracks where investors think the Fed is heading, closed at 4.77%, down 5 basis points. The WSJ Dollar Index, the dollar against a basket of other currencies, fell 0.32% in the same session as traders pared their bets on a rate increase.

Two mechanisms are doing the work. The first is why a wholesale number matters to a household at all: producer prices are collected one step up the chain from the cash register, so that jump in wholesale gasoline is a cost refiners and distributors already carry before any pump price is posted. September's consumer figures showed the household half of that: pump prices up 9.1% in the month, more than half of the entire consumer increase. The second is about silence. Speaking in Bangkok late Thursday night, Fed Chairman Kevin Warsh declined to endorse or push back on colleagues' signals that officials are in no rush to raise rates this month. The Journal quoted him saying the Fed is "not in that business anymore." MarketWatch noted he had the chance to shape expectations and chose not to. When a central bank stops previewing its decisions, traders take their cue from the data and from what other officials have said. That is why Thursday's bond and currency moves happened without a single word of guidance behind them.

The case that this is more than gasoline sits in one line. Strip out food, energy and trade services, the volatile categories economists set aside to find the underlying trend, and prices still rose 0.5% in the month and 5.0% over twelve months. That core figure is a different measure from the 6.3% headline, and it is the one arguing the pressure reaches past the pump. The case the other way is just as plain: energy increases can reverse as quickly as they arrive. The Economic Times reports markets largely expect the Fed to hold at its October 27-28 meeting.

Sources: BLS · WSJ · MarketWatch · Economic Times · U.S. Treasury · Rapunzl's October 5 briefing

MSCI Said Indonesia May Not Belong In Its Emerging-Market Indexes, And Jakarta Dropped 11%

MSCI, the index provider, warned that Indonesia's classification as an emerging market "may no longer be appropriate." An index is a list of companies held in set proportions, and MSCI also sorts whole countries into tiers; Indonesia could fall from the emerging-market tier to what MSCI calls a standalone market. Its stated reasons are market transparency, opaque shareholding structures and policy credibility. Nothing has been decided. Indonesian stocks fell anyway. The Jakarta Composite, the main index of shares in a market worth about $1.5 trillion, opened 8% lower on Friday, tripped a 30-minute trading halt, and fell as much as 11.4% at its low, the lowest since November 2020. The Wall Street Journal reported it was headed for its biggest drop since the 1998 Asian financial crisis.

Here is why a warning by itself can do that. A classification from an index provider is not an opinion investors can shrug off. Enormous sums sit in tracking funds, whose whole job is to hold exactly what is on a given index, without second-guessing any of it. The lower a country's tier, the less of that money has to be invested there at all. So if MSCI moves Indonesia out of its emerging-market indexes, every fund tracking them becomes a forced seller of Indonesian shares on the day the change takes effect, regardless of what any manager thinks of any Indonesian company. The selling is mechanical and the timing is published in advance, which gives anyone who can sell ahead of it a reason to try. That is the 11% morning, before any decision exists.

Friday landed on a market already having a hard year: Indonesian stocks are down nearly 40% in 2026. Index funds are how a household here ends up owning foreign stocks. An international index fund in a parent's workplace retirement plan usually holds an emerging-markets slice built from this sort of list. Which countries sit in that slice, and in what weights, is MSCI's call. So a call made in one company's office about one country's disclosure rules shows up, in a small way, inside accounts belonging to people who have never heard of the Jakarta Composite. That is not a reason for anyone to do anything. It is the wiring, and knowing the wiring is how a headline from half a world away stops being abstract.

Sources: Economic Times · WSJ

The AI Debt Worry Now Has A Company Name, A 16% Bond Yield, And Lenders Backing Away

Thursday's briefing covered an AI selloff that started with debt rather than demand. CoreWeave, which rents out data center computing power and carries around $50 billion in debt, saw both its shares and its bonds sell off. Yields on some of those bonds, the ones issued in April and due in 2031, surged above 16% during the October 15 sell-off. Axios reported that Wall Street appears to be hitting its limit on AI, with financiers starting to say out loud that the spending does not look like it can pay off for everyone. Thursday was about prices falling; this is about the people who supply the money. The Dow industrials rose Thursday while the Nasdaq was heading for a fourth straight decline, with investors turning toward government bonds instead.

Why does a bond yield belong in a story about tech stocks? A bond is a loan investors make to a company in exchange for a fixed stream of payments. The yield is what a buyer earns at the price the bond trades at, so when the yield goes up the price has gone down: buyers are paying less for the same fixed payments. A company that borrows to build data centers eventually has to refinance, meaning borrow again to pay off what is coming due. The yield its existing bonds trade at is the market's live estimate of what that next round will cost. So a 16% yield is not a side detail. It is the market saying this borrower's next dollar of financing will be expensive, and for a business whose plan is to keep borrowing to build, the cost of the next dollar is the plan. That is a different question from whether anyone will buy AI, which is the demand question. The riskiest corner of the AI trade is the part that feels higher borrowing costs first.

Sources: Economic Times · Axios · WSJ · Rapunzl's October 15 briefing

What To Watch

The regional banks are expected to report before the open today. The line to watch is net interest income, the difference between what a bank earns on its loans and what it pays for deposits. All figures below are analysts' average estimates, not results.

Expected to report today, before the open:

• Travelers (TRV), $7.01 against $8.14 a year ago
• Truist Financial (TFC), $1.17 against $1.04
• M&T Bank (MTB), $4.98 against $4.87
• Citizens Financial Group (CFG), $1.38 against $1.05
• Regions Financial (RF), $0.67 against $0.63
• HDFC Bank (HDB) and ICICI Bank (IBN), also today, both near $0.40

Next week:

• Monday: Fifth Third Bancorp (FITB) before open at $1.09, with Zions and Western Alliance after the close
• Tuesday: GE Aerospace (GE) at $2.01, RTX at $1.76, General Motors at $3.52 and Northrop Grumman at $7.22, all before the open
• Tuesday after the close: Netflix (NFLX) at $0.82, Capital One at $5.45, Chubb at $6.42 and United Airlines at $2.60

Beyond that:

• The Federal Open Market Committee, which sets the country's benchmark short-term interest rate, meets October 27 and 28, with a press conference on the 28th.
• The Bureau of Economic Analysis is scheduled to release Gross Domestic Product and Personal Income and Outlays on October 29.

The Classroom Takeaway

A rate decision is not made by one person reading one number: a committee weighs a wholesale price index, a consumer one, retail sales and a jobs picture that point in different directions, and this time its chairman would not say which way he was leaning. Students can sit in that seat and make the call themselves with Run the Fed.