PPI Just Posted Its Biggest Jump in Four Years

Wednesday's hot CPI wasn't the end of the story — it was the opening act. Two straight days of upside inflation surprises have yanked a Fed rate hike back into the picture, and Thursday's data just made the case stronger. What Happened September wholesale prices jumped 1.3% in a single month, the biggest PPI gain since March 2022, pushing the annual rate to 6.3%. Core PPI rose 0.7%, more than double the consensus. Meanwhile September retail sales rose 0.8%, beating the 0.3% forecast — but gasoline accounted for most of the gain, and inflation-adjusted wages fell again. On Wednesday, the S&P 500 fell 1.1% and the Nasdaq 1.9%, each their worst session since July, while the Dow held nearly flat as defensive names rotated higher. CME futures now imply roughly a 40% chance of a Fed hike on October 27–28, up from about 22% on Tuesday. Why It Matters The market's question has flipped from "will the Fed cut" to "will the Fed hike twice in two months." Energy costs are passing through into producer prices, and consumers are buying the inflation they complain about — pump prices propped up retail sales. That keeps the demand pipeline hot just as the Fed heads into its pre-meeting quiet period on Saturday, with Chair Warsh's Friday IMF fireside chat as the last word before the blackout. Under the Hood The AI trade split in two. ASML posted record sales, raised guidance for the third time, and said it can't build fast enough — yet debt-fueled AI infrastructure names like CoreWeave (−15%) got crushed as borrowing costs repriced. The demand is fine; the financing is the problem. Meanwhile, JPMorgan's first earnings miss in three years, paired with Jamie Dimon's warning about deficits and sticky inflation, was the loudest credible voice suggesting the cycle may be turning. What Hedgehog Is Watching Friday brings industrial production, import prices, and Warsh's IMF fireside — his final public appearance before the quiet period. Then the October 27–28 FOMC. And three weeks out from the midterms, gasoline is doing the macro storytelling. Two inflation reports, both hot. The market's new game: price the hike, watch Warsh, and hope the October 29 PCE tells a softer story. That's a lot of hope at 5.19% on the 10-year. Sources: Wall Street Journal, Reuters, Barron's, MarketWatch, Bureau of Labor Statistics.