Hike Odds Jump, Oil Drop Lifts Stocks
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Core ran hot. A September hike is almost locked
The BLS printed August CPI on September 11 in New York. Headline rose 0.4% month over month and 3.4% year over year, both in line. Core rose 0.3% month over month, a tenth hotter than the 0.2% estimate. The 2.4% year-over-year core print matched the estimate and sits on the soft side of this cycle. The headline can pass. The monthly core is what reprices the funds rate.
Gasoline jumped 3.9% and accounted for more than a third of the monthly all-items gain. Energy rose 2.1% on the month and 16.3% over the year. Gasoline is up 27.4% year over year. Fuel oil is up 52%. Food edged 0.1% higher. Food at home was unchanged. Food away from home rose 0.3%. Shelter rose 0.3% after two months that had slowed to 0.1%. Owners’ equivalent rent and rent each rose 0.2%. Lodging away from home jumped 2.4% after a 2.8% drop. Transportation services rose 0.5%. Airline fares rose 2.7%. Communication rose 2.3%. Used cars and trucks rose 0.4%. New vehicles rose 0.3%. Apparel was flat. Motor vehicle insurance fell 0.8%. Medical care moved lower. Core did not blow up in one line item. Shelter re-accelerated, communication and airfares stacked on top, and the monthly core ran hot.
Energy that was already moving on the producer side is now in the consumer print. More than three-quarters of Thursday’s PPI goods increase could be booked to energy. Gasoline alone carried more than a third of Friday’s CPI gain. A cooling core year-over-year rate is not the same as energy spillover being done. The next print is not here yet. Watch whether crude stays above $100.
Fed funds still sit at 3.50% to 3.75%, on hold for a full year. This was the last major inflation print before the FOMC. The meeting is September 15 to 16, with a Wednesday vote. CME odds on a 25 basis point hike sat near 70% into the print and jumped to about 85% to 90% after it. That is nearly locked. Chair Warsh had already set the bar: if the numbers do not keep cooling, the Committee has work to do. This core month leaves little room to stand pat. Restarting hikes after a pause hits the tape differently than hiking again from a hiking cycle. Discount rates go up one notch. Growth stocks feel it first. At least one hike in the September-October window was already in the price after PPI. Friday only narrowed the “wait another meeting” case.
Oil came off the spike. That is what put 7620 back
The four major indexes closed green and snapped a four-session losing streak. SPX closed 7656.98, up 0.86%, and took back the 7620 line lost on Thursday. The Dow closed 52573.29, up 0.98%. Nasdaq closed 26333.04, up 0.96%. Russell rose only 0.4%. VIX closed about 15.84, down about 11% on the day. Thursday’s close was about 7592. The index broke 7620, got rejected, and VIX tagged about 18. Friday put the first CTA sell line back. Volatility coming in is not the same as leverage coming back. That is a squeeze bounce, not a new trend.
The 10-year tagged about 4.99% after the print, one step from 5%, then faded to about 4.95%. The 30-year tagged about 5.42%, a roughly 19-year high, and finished near 5.34%. The 2-year jumped about 4.6 basis points to about 4.59%. Thursday had already taken the 10-year to about 4.96% and the 30-year to about 5.37%. Friday made new highs in both, then oil pulled them back into the close. Bonds did not get an “inflation passed” bid. Yields are still hugging the recent highs. Tight bonds plus easier oil is what let the index finish green. Reading the green close as inflation clearing the bar flips the tape.
Oil did the lifting. WTI settled $100.05, down 2.37%. Brent settled $104.61, down 2.81%. Both had jumped about 6% the prior session. Brent tagged a four-month high near $110 intraday, then sold off. Reports that Gulf foreign ministers are talking a temporary Hormuz shipping arrangement more likely line up with a geopolitical-premium fade. That is not the same as the strait being open. Crude is still set to finish the week above $100, the first time since mid-May. Diesel is still elevated. Oil off the spike eases growth-stock discount rates the same day. The index eased with it. Core CPI did not give that permission. Weekend Gulf headlines will reprice oil first, then Monday’s open. If crude runs again, 7620 can be handed back the same session.
SOXX tagged the door again. Software is still a bounce
SOXX opened 525.24, high 531.04, close 527.07. Thursday’s high was about 523, close about 517. 532 failed confirmation. Friday tagged the door and still did not close through it. Highs are lifting. Trends need a close, not a tag. Trade the group as a hotspot. Closing confirmation is still missing.
AMD closed 516.13, high 521.06, low 501.35, on about 18.76 million shares. Thursday closed about 504 on about 15.9 million. Volume came back a bit. 467 is still the gate. Until it closes through the prior-high area, a failed breakout stays a failed breakout. This is a retest after failure, not a new breakout. NVDA closed 218.29, low 218.15, glued to the lower edge of 217 to 228 for a second session. The index bounced. Nvidia did not lead. Minor support is optional. A serious longer-term look still waits for 205 to 215. Semis did not drag the index higher. Oil eased one notch and the index bounced on its own. The structure is unchanged: what had been strong stopped leading. What was weak repaired first.
IGV opened 101.90, high 102.78, low 101.13, close 101.52. Thursday opened about 100.8. The gap already broke 101. The close near 101.2 was a bounce after the break. 101 flipped from a buy zone to resistance. Friday is still a rebound inside 101 to 107. Overhead supply will thicken. Energy only returns through 107. This software run stopped at 110, about $7 short of a new high. Same level, not the same trend. September and October are already high-vol months. Short-term work is now intraday. Hold an extra day and the tape can flip.
Oracle gave the gap back in one session. Adobe reclaimed 248
ORCL opened 164.43, high 166, low 149.84, close 150.28, on about 78 million shares. This was the first cash session after the print. Fiscal first-quarter revenue was $19.3 billion, up 30%. Cloud infrastructure was $7.4 billion, up 121%. Remaining performance obligations were $664 billion. Free cash flow was still negative $5 billion. CapEx was about $28.5 billion. The company also sold about $20 billion of stock through an ATM. The numbers cleared. The story did not accelerate. Thursday fell about 5% in the regular session, recouped after hours, opened near 164 from about 153, and closed 150. The gap was gone in one session. Price is still the 147 to 159 sideways band. Do not look for 175 to 183 yet. Contracts and capacity are not the same as revenue following the slope now. A large positive on that side helps Oracle most. A hole there rewrites Oracle first.
ADBE opened 242.17, high 255.30, low 241.51, close 252.23. Fiscal third-quarter revenue was $6.76 billion, up 13%. Non-GAAP EPS was $6.13. AI-related annual recurring revenue rose 150% year over year. No dollar figure. Fourth-quarter revenue guidance is $6.80 to $6.85 billion. The midpoint sits a touch under the Street number. The stock was soft after hours, recouped that slide Friday, and reclaimed 248. 235 and 248 remain the nearby band. It looks cheap. The note next to it is value trap. Image and media tools sit on the layer generative models replace most easily. If you are not in, there is no need to force it while visibility is this low. If you are in, you live quarter to quarter on whether recurring revenue holds. Lose 248 and the next strong support is still 182. The gap in the middle is wide. Do not treat that as a normal dip.
FOMC next week. Do not rewrite the switches yet
7620 came back because oil came off the spike. Core inflation did not reopen a cut. A 25 basis point hike is nearly locked heading into the Wednesday vote. Hedge funds are still in low-exposure watch mode. They are waiting for two things: a clean trend to buy, or a flush that clears risk so leverage can go back on. Treating this bounce as a new trend has no edge. If the map is unclear, sit out.
Three scenarios. Base case: hike 25 basis points, the statement does not write energy spillover into a new inflation center, and oil does not run again. The index can grind around 7620. Semis get another shot at a closing confirmation. Hawkish: they hike and still stress that core has to come down and energy may spill. The 10-year retests 5%. 7620 can be handed back the same day. Surprise hold: the odds are already small. If it happens, shorts cover first, then the tape asks what oil and shelter do next. Do not add risk in advance on that branch.
Near-term switches: SPX 7620 is a bounce line until it holds after the vote. The 10-year 5% level is still the gate. SOXX has not cleared 532. IGV 101 is no longer a buy. 107 is the energy line. AMD still watches 467. ORCL still watches 147 to 159. The switches did not change. Oil gave one session of air. That air has to last into the FOMC before a second confirmation is on the table. If it does not, watch 5% and 7620 first.