Inflation Heats Up, Tech Cools Down
For the week ended 10/17/26.
Fall temperatures may be cooling, but apparently inflation didn’t get the memo. Consumer prices rose 3.7% over the year through September, up from August’s 3.4% and above economists’ expectations of 3.6%. Another month, another reminder that declaring victory over inflation is a hazardous occupation.
Looking under the hood, core inflation, which excludes food and energy, registered 2.6% annually, while prices increased 0.3% for the month. Both readings exceeded forecasts. More concerning, there are signs that elevated energy costs are working their way into other prices. Apparently, higher fuel bills don’t politely remain at the gas station.
For households, the math remains unpleasant. Average hourly earnings increased 3% over the past year, trailing inflation for the sixth consecutive month. Getting a raise while losing purchasing power is a particularly lousy version of moving up in the world.
Unfortunately, the wholesale numbers offered little comfort. The Producer Price Index jumped 1.3% in September, its largest monthly increase since March 2022, bringing the annual gain to 6.3%. Businesses can absorb higher costs through lower profit margins or attempt to pass them along to customers. Neither option deserves much applause.
Together, these reports strengthen the case for another Federal Reserve rate increase later this month. Some producer-price data also feed into the Fed’s preferred inflation measure, the Personal Consumption Expenditures Price Index. In other words, policymakers have another reason to keep the antacids handy.
Checking in on the markets, real estate led last week’s performance derby with a 1.1% gain, followed by the much-maligned bond market at 0.9%. Hey, everyone gets to join the party eventually. Liquid alternatives slipped 0.1%, foreign stocks fell 0.6%, and domestic stocks brought up the rear with a 1.9% loss.
Technology was at the center of the retreat, with the Nasdaq Composite falling 4.5% on Friday. Investors worried that higher borrowing costs could slow the enormous investments going into artificial-intelligence infrastructure. AI may promise to change everything, but apparently it still has to contend with the cost of money. Even the future has a financing department.
That anxiety sent investors back toward government bonds, providing some relief after a bruising selloff. It also illustrated why diversification still matters: the investments everyone complains about can occasionally become the ones they’re glad to own.
Looking ahead, the economic calendar is relatively light, with S&P Global’s manufacturing and services purchasing managers’ surveys among the highlights. They’ll offer another check on business activity – and whether price pressures are continuing to spread.
Until then, may your team perform better than mine, your paycheck stretch a little further, and your fall walks require considerably less analysis than the bond market. Get outside and enjoy the weather.
Good morning.
Interesting data point of the week.
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