Chips Crack, Prices Climb and the Fed Waits

A four-week Nasdaq winning streak ended with a thud. The S&P 500 closed at 7,659.44, down 1.95% on the week and 1.09% on Friday alone. The Nasdaq Composite fell 4.48% to 26,140.03, while the Russell 2000 dropped 3.05% to 2,721.37. The Dow was the lone winner, up 0.67% to 52,002.41 for a second straight weekly gain. The S&P 500 remains up roughly 11.9% year to date and the Nasdaq 12.5%. We could not verify the NYSE Composite close at press time and have left it blank rather than guess.

Chips, Credit and the AI Question

The semiconductor index fell for an eighth straight session Friday, and the S&P technology sector dropped about 3%. CoreWeave fell roughly 12%, its second big drop in three days, as investors fretted over about $50 billion of debt; Nvidia CEO Jensen Huang said the company does not need to backstop it. Meta fell nearly 4%, Tesla slipped 2% despite unveiling a new Roadster, and Nvidia lost 1.5%. The worry is no longer only about AI revenue; it is about who pays for the buildout. Strategists note that tech's heavy index weighting has historically coincided with market peaks, though that is a pattern, not a prophecy. Big Tech earnings arrive next week, led by Meta and Tesla on Wednesday.

Inflation: A Hot CPI and a Hotter PPI

September CPI rose 0.6% on the month and 3.7% from a year earlier (forecast 3.6%; August 3.4%). Core CPI rose 0.3% m/m and 2.6% y/y (August 2.4%). Gasoline jumped 9.1% in the month, with the average pump price hitting a record $4.33, and fuel oil rose 15.3%. Average hourly earnings are up 3% y/y, so real wages have fallen about 0.7% over the past year. On Thursday PPI surged 1.3% m/m and 6.3% y/y, the highest since January 2023, with core PPI up 0.7% m/m and 5.0% y/y; analysts pointed to AI infrastructure buildouts and freight costs. Retail sales rose 0.8% (0.4% expected; August revised up to +1.3%), though gas stations (+6.4%) flatter the figure. Initial jobless claims were 199,000, still low. Import prices rose 1.1% and industrial production 0.7% on Friday, both above forecasts. Empire State manufacturing jumped to 25.5; the Philadelphia Fed index slowed to 20.9.

The Fed and the Bond Market

Markets briefly priced a far higher chance of an October hike: odds touched about 44% after CPI before settling near 17% by Friday, with a December move near 89%. The funds rate sits at 3.75-4.00% after the September 16 hike. Chicago Fed President Goolsbee called the data "discouraging" but wants more information, and Chair Warsh, speaking at the IMF meetings in Bangkok, gave no signal on rates. The 10-year yield peaked near 5.33% Wednesday but closed the week at 5.10%, down about 15 basis points, as equity weakness fueled a bond bid. The 30-year mortgage rate rose to about 7.56%.

Oil, Dollar, Gold, Bitcoin and Banks

WTI settled at $101.41, up 10.4% on the week, and Brent at $109.86, up 4.9% and briefly touching $110, its highest since May. Drivers included an intercepted missile aimed at Saudi Arabia's Yanbu port, Iranian attacks on shipping that cut flows through Hormuz, and an 8.6 million barrel crude inventory draw. The IEA said it will accelerate emergency stock releases and the US is reportedly weighing easing sanctions on some tankers, while President Trump said the US may strike Iran's nuclear facilities again. Reasonable observers disagree on whether pressure or diplomacy is the better path; oil simply priced the risk. The dollar index ended near 101.80, down about 0.4% after touching its highest since April 2025 on CPI day. Gold finished near $4,167, down roughly 0.4%, and bitcoin near $81,400, a second weekly decline. The VIX jumped to 19.99. In bank earnings, Goldman Sachs beat by about 32% on a $6.44 billion equities trading haul, while JPMorgan (-3.0%) and Bank of America (-1.8%) missed; all six big banks fell on report day, and Jamie Dimon cautioned on deficits, sticky inflation and rising rates.

Big Tech Earnings Before the Fed

The calendar is lighter on data and heavier on earnings. The marquee events are Meta and Tesla on Wednesday after the close, with Netflix, GM, GE Aerospace, RTX and 3M on Tuesday. The next FOMC meeting is October 27-28, the week after, so this week's data and Fed commentary shape hike odds.

Mon Oct 19 and Tue Oct 20: Housing and Industrials

The NAHB housing index arrives Monday and housing starts and permits at 8:30 AM Tuesday. Netflix, Capital One and Intuitive Surgical report Tuesday after the close.

Wed Oct 21 to Fri Oct 23: Tech, Claims and PMIs

Meta, Tesla, IBM, Texas Instruments and Lam Research report Wednesday after the close, plus a 20-year Treasury auction. Thursday brings jobless claims, leading indicators and the Kansas City Fed survey. Friday has preliminary PMIs and final University of Michigan sentiment at 10:00 AM, plus American Express earnings.

Three stories collided this week: an AI trade questioned on financing, an inflation backdrop that is broad rather than just energy, and oil back above $100. The constructive reading is that the Dow and bonds held up, claims remain low, retail sales are firm and a VIX near 20 is a wobble, not a panic. The cautious reading is that core CPI is accelerating, producer prices are running at 6.3%, the Nasdaq just had a 4.5% week, and a Fed that has already hiked once has little room to look through it. Next week's tech earnings, with Meta and Tesla in the spotlight, will show whether AI spending is earning its keep before the Fed meets.