Thursday's Final Takeaways: Crude Taps $103 & PPI Hotter than Expected

Marley Kayden (0:01)

Welcome back to Market On Close. I'm Marley Kayden here in Chicago. Here's some final thoughts on the session today. Wholesale inflation came in hotter than expected in August, with the producer price index rising four-tenths of a percent for the month, and 5.4% from a year ago. That's the highest annual pace this year. Goods prices jumped 1.1% with energy costs being a major driver, while core PPI was up 4.6% year over year. The hotter inflation reading is pushing investors to raise their expectations for a Fed rate hike next week. With treasury yields jumping, we saw the 10-year going above 4.9% for the first time since 2023

Stocks also under some pressure today as the markets now have to contend with the possibility that the Fed could respond to persistent inflation by keeping rates higher for longer and potentially raising rates at next week's meeting. Traders pushed chances for a rate increase to about 70% this morning following that report. Also adding to the increased expectations for a hike were oil prices. Oil is back above $100 a barrel as the latest escalation between the US and Iran raises fresh concerns about global energy supplies. Brent crude is hovering over $108 right now. WTI is almost at $103 after Iran said it attacked 10 ships near the Strait of Hormuz following the US destruction of five Iranian oil tankers. The concern for the markets here is that further disruption to shipping through Hormuz could tighten an already constrained physical oil market. Goldman Sachs warning that crude could potentially move above $120.

That of course putting renewed pressure on inflation expectations and of course adding another complication for the Fed. As we head into tomorrow, PPI already raised the stakes today for the CPI data that we'll get in the morning. Economists expect headline CPI to increase 4 tenths of a percent in August with core CPI rising 2 tenths of a percent. That would have put annual headline inflation around 3.4 percent, core inflation near 2.4 percent. Those numbers, if in line, wouldn't represent runaway inflation, but they are still above the Fed's 2 percent target. So a big potential catalyst coming our way in the morning, but that is going to do it for us today on Market On Close. I'm Marley Kayden. We really appreciate you joining us today. Be sure to download our Schwab Network app available in the Apple App Store and you can tune in 24-7 on schwabnetwork.com.

I hope you have a wonderful rest of your Thursday.