Major U.S. indexes rose on Friday as investors processed the latest Consumer Price Index (CPI) data, which indicated that inflation remains elevated. This data bolstered expectations that the Federal Reserve will increase interest rates during its upcoming meeting.
Stock Market Movements and Inflation Data
On Friday, the Dow Industrial Average (^DJI) and the tech-heavy Nasdaq Composite (^IXIC) saw gains of approximately 0.9% to 1%. The S&P 500 (^GSPC) climbed 0.86% to 0.9%. While these gains marked an upward swing, all three major indexes posted weekly declines, concluding a four-day losing streak.
Market attention focused heavily on the CPI report. According to the Bureau of Labor Statistics, the overall price increase in August reached 3.4% on an annual basis and 0.4% month over month. These figures were consistent with economic forecasts, though the 0.4% monthly rise was faster than the 0.1% recorded in July.
Critically, when excluding volatile food and energy costs (the measure preferred by the Fed), the CPI (or “core” CPI) rose 0.3%, which was slightly higher than the projected 0.2%. This report prompted traders to significantly increase their probability estimates regarding a Fed rate increase.
Markets are now pricing in a roughly 87% chance the Fed raises interest rates by 25 basis points at the FOMC meeting next week, according to the CME’s Fedwatch tool. This represents an increase from 72% the previous day, and from 50% a week earlier.
Energy Costs and Treasury Yields
Energy prices added complexity to the market picture. Diesel prices reached a new record, climbing above $6 per gallon on Friday. Meanwhile, leading crude benchmarks—international Brent (BZ=F) and US WTI (CL=F)—remained above $100 per barrel, although WTI crude saw a decline to $100 per barrel on Friday.
In the bond market, yields on U.S. Treasuries edged higher after initially dropping following the inflation announcement. Specifically, the yield for the 10-year note (^TNX) concluded the day just below 5%.
Peripheral Market Updates and Corporate News
Beyond the major index movements, several sectors reported significant news:
Consumer Confidence and Inflation Expectations
A preliminary reading from the University of Michigan showed that consumer sentiment decreased to 47.8 in September, falling from 51.7 in August and below the 51 expected level. Inflation expectations also climbed, with the 12-month forecast jumping to 4.6% from 4% the prior month. The survey’s director, Joanne Hsu, noted that the resurgence in fuel prices and ongoing trade tensions are prompting consumers to anticipate greater financial pressure.
SpaceX AI Computing Deals
In a separate announcement, SpaceX reported major progress toward its revenue goals. During the Goldman Sachs Communacopia & Technology Conference, CFO Bret Johnsen confirmed that the company is on track for its $100 billion annual recurring revenue (ARR) target. Johnsen stated:
SpaceX (SPCX) just inked another big AI compute deal, one that will take the space and rocket company closer to its $100 billion annual recurring revenue (ARR) target this year, a big metric for investors.
At the Goldman Sachs Communacopia & Technology Conference in San Francisco, CFO Bret Johnsen said a new AI compute deal has been reached in which SpaceX leases out compute bandwidth for third-party clients.”
“We’re on track, or we believe we’re on track to hit $100 billion ARR,” Johnsen said about SpaceX’s overall ARR target, as AI compute deals helped fuel the growth, before revealing the news. “What I would tell you, an update to that is that just earlier this month we closed another hosting deal, and that translates into about $1.11 billion a month starting December 1st of this year, which is another roughly $13 billion of ARR.”
Cryptocurrency Regulatory Framework
Regarding the cryptocurrency industry, Coinbase CFO Alesia Haas addressed the Clarity Act, which aims to establish a comprehensive federal regulatory framework for U.S. digital assets. Haas noted that there are multiple avenues for regulatory change, stating:
“There was always three paths to getting Clarity,”
Haas explained. “There was Congress, there were the agencies themselves, or there was the court system,”
“So if Clarity doesn’t pass by Congress, we believe that we have a path via the SEC and the CFTC. Both Chair Selig [CFTC] and Atkins [SEC] have been incredibly innovative in trying to drive forward change in rulemaking at the agency level. And so we believe we’ll be able to offer new products and services via the agencies.”
Geopolitical Impact on Oil Supply
In a separate development, Saudi Arabia announced the closure of its crucial East-West oil pipeline following recent attacks. This move impacted the global energy market, affecting crude oil futures. The East-West pipeline is vital for exporting oil from the Persian Gulf to the Red Sea, especially after the war in Iran caused traffic through the Strait of Hormuz to nearly cease.
