What moved
- US: the S&P 500 finished up 0.86% at 7,657, the Nasdaq Composite 0.96% higher at 26,333 and the Dow 0.98% up at 52,573 — recovering roughly what Thursday's slide took away. The Russell 2000 lagged, closing up 0.45%.
- Europe closed firmer, led by the DAX (+0.82% to 25,569) and Euro Stoxx 50 (+0.90% to 6,325); the CAC 40 added 0.78% and the FTSE 100 0.39% to 10,650.
- Asia took the brunt of Thursday's US selloff and the oil spike: the Nikkei ended 1.74% lower at 64,011, the Kospi 2.01% lower at 6,910, the Hang Seng down 1.86% and Taiwan's benchmark down 2.12%.
Why
The day turned on oil, not on the Fed. August CPI landed at 08:30 ET showing headline prices up 0.4% on the month and 3.4% on the year, in line with forecasts, with core a touch hotter than expected at 0.3% monthly and 2.4% annually. Gasoline accounted for more than a third of the monthly increase. That was enough to push the market-implied probability of a quarter-point rate rise at Wednesday's FOMC meeting to around 90% from roughly 70% a day earlier — the first hike in over three years, if delivered. Equities shrugged because the number removed uncertainty rather than adding to it: a hike was already the base case after Thursday's PPI, and the two-year sector had done its repricing the day before.
What changed on the day was crude. Brent fell 2.75% to $104.67 and WTI 2.18% to $100.25 after reports that Gulf Cooperation Council foreign ministers will meet their Iranian counterpart on Monday — the first such gathering since the war began — to discuss a scheme for managing shipping through the Strait of Hormuz. Lower oil is the cleanest transmission into US equities right now: it eases the inflation impulse that is forcing the Fed's hand and lifts margins for everything that is not an energy producer. Technology, the sector most punished by the yield backup, led the rebound.
The bond market did not fully buy the relief. The 10-year yield rose a further 3.1 basis points to 4.975% and the 5-year 5.8 basis points to 4.791%, while the 30-year eased 0.7 basis points — a flattening consistent with a hike being priced in rather than priced out. The Brent pullback is also fragile: Houthi forces seized the port of Mokha near the Bab al-Mandeb strait during the session, and crude still ended the week up 6.89%.
Sentiment & risk appetite
Fear came out of the options market faster than the tape: the VIX fell 11.21% to 15.84, and the MOVE index was flat at 82.2 — the rates market is not treating Wednesday as a shock. Nine of eleven US sectors rose, with technology (+1.32%) and industrials (+1.07%) at the top and utilities (-0.31%) and health care (-0.18%) the only decliners, so the bounce was broad by sector if not by size. Gold added 0.59% to $4,390 and the dollar index was little changed at 99.15, meaning nobody reached for a haven and nobody abandoned one. Our breadth figures still reflect Thursday's rout — 1,909 US advancers against 3,830 decliners across PrimerIQ's universe — a reminder that one up day has not repaired the internals. Asia's breadth on the day was dire: under a quarter of names rose.
Economic calendar
August CPI printed at 08:30 ET today: headline 0.4% m/m and 3.4% y/y, matching consensus; core 0.3% m/m against 0.2% expected and 2.4% y/y as forecast. The University of Michigan's preliminary September sentiment index, out at 10:00 ET, fell to 47.8 from 51.7, well below the 51.0 expected, with year-ahead inflation expectations jumping to 4.6% from 4.0% on fuel prices and trade tensions. Thursday's PPI (0.4% m/m, 5.4% y/y) and jobless claims of 206,000 set the backdrop. Nothing further is scheduled today. The week ahead is dominated by the FOMC decision on Wednesday 16 September at 14:00 ET, preceded by Monday's GCC–Iran foreign ministers' meeting.
Earnings
Kroger, the only US name of consequence to report today, beat on adjusted earnings at $1.09 a share against the $1.05 consensus but missed on revenue at $34.62bn versus $34.69bn, and trimmed its identical-sales guidance to 0.2–0.8%; the shares rose about 3% as the profit line and reaffirmed full-year earnings range of $5.10–5.30 carried the day. Nothing material reported after the close.