A worker arranges peaches at a fruit stand at Pike Place Market in Seattle, Washington, U.S., Thursday, July 4, 2024.
Sung-jun Cho | Bloomberg | Getty Images
This report comes from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open keeps investors updated on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Inflation higher than expected
USA According to the Labor Department, the consumer price index rose 0.2% in September, bringing the annual inflation rate to 2.4%. Both figures were 0.1 percentage points higher than the Dow Jones Average. Still, the annual growth rate is at its lowest level since February 2021.
The market is too hot for comfort
Major U.S. stock indexes fell on the hot CPI report. this S&P 500 Index Down 0.21% Dow Jones Industrial Average Down 0.14% Nasdaq Index down 0.05%. Pan-European Stoxx 600 Index down 0.18%. The German government predicts that Germany’s gross domestic product will shrink by 0.2% this year, marking its second annual decline.
The bank is not yet clear
Lower interest rates tend to be good for banks. As yields on money market funds and other assets fall, the flight of cash from bank accounts will slow. This lowers banks’ funding costs, while yields on banks’ income-generating assets do not fall as quickly. But that expectation may not be so perfectly realized this time.
AMD releases new AI chip
AMD A new artificial intelligence chip, the Instinct MI325X, was released on Thursday and is positioned as a competitor NVIDIA Blackwell wafer. Both are graphics processing units that are critical for the large language models that power artificial intelligence systems. If AMD’s chips are seen as a viable alternative to Nvidia’s chips, this could put pricing pressure on the latter.
(PRO) A glimmer of hope from the CPI report
Yesterday’s consumer price index report may disappoint the market with data that beat expectations. But if you read between the lines, the report not only has encouraging signs, but also contains a glimmer of hope, writes CNBC Pro’s Fred Imbert.
bottom line
If inflation becomes severe, interest rates will need to be raised to throw cold water on the economy and slow it down.
Atlanta Fed President Raphael Bostic agreed. “I’m totally willing to skip the meeting (to cut rates) if the data suggests it’s appropriate,” Bostic told The Wall Street Journal on Thursday.
The data shows this is indeed the case. both The September jobs report and consumer price index both came in higher than expected. “To me, this volatility probably means we should take a pause in November,” said Bostic, a voting member of the Federal Open Market Committee.
But Bostic acknowledges that it’s important to understand whether individual data points coalesce into a larger pattern, or whether they’re just “a jumble,” as Bostic puts it.
The futures market seems convinced these numbers are bad. According to the central bank, traders increased bets on rate cuts after digesting the CPI report. CME FedWatch Tool.
They now believe the probability of the Fed cutting interest rates by 25 basis points at its November meeting is 83.3%, up from 80.3%. The increase in stakes is small. But its implications are significant: Even after the CPI report was released, the market still seemed more concerned about a slowdown in the economy than that inflation remained sticky.
Initial jobless claims for the week ended Oct. 5 may add to those concerns.
But the number could also be bad. “This morning’s sharp increase in jobless claims is tied to hurricane-related distortions and is the tip of the spear of recent distortions in key economic data,” said Joseph Brusuelas, chief economist at RSM.
If “key recent economic data” is overall erratic and distorted, then perhaps the best thing we can do is wait and wait for this turmoil to be over.
– CNBC’s Jeff Cox, Samantha Subin and Hakyung Kim contributed to this article.
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