Financial Market News | Saturday Review

The week opened on a birthday. The bull market turned four Monday, with the S&P 500 up more than 110% since Oct. 12, 2022. The 10-year yield sat near 5.24%. The bet was simple. Profits would keep pace with 5% money.

Then inflation ran hot twice. Consumer prices rose 3.7% from a year earlier, and producer prices jumped 1.3% in a month. The old script called for higher long yields. Instead, the 10-year ended Thursday at 5.10%.

The pressure moved somewhere else. Lenders asked AI's most indebted builders for distress-level yields, even as TSMC (TSM) and ASML (ASML) said chip demand still outruns supply.

Stocks sorted the same way. Through Thursday, the Dow rose 1% while the Nasdaq lost 2.4%. By Friday afternoon, the Nasdaq was down about 4% for the week and the S&P 500 about 2%. South Korea's market lost about 14%.

Six threads. One shift. On Monday, the worry was the price of money. By Friday, it was who can still get it.

Inflation Beat Twice. The Hike Bet Rose and Fell.

September consumer prices rose 0.6% from August. Core prices, which leave out food and energy, rose 0.3% for a second month. Forecasts called for 0.2%.

Producer prices rose 1.3% Thursday, more than twice the 0.6% forecast. Energy drove more than 80% of the jump in goods prices.

Kalshi's October hike contract traded near 18 cents before Wednesday's report. It touched 55 cents within the hour. Producer prices moved it only briefly. Then Fed Chair Kevin Warsh said, "I don't prejudge meetings." By early Friday, the contract was at 14 cents.

Investor Signal

Two hot reports left the hike bet lower than before them. Energy drove much of both reports, a cost the Fed may look past. Cleveland's Beth Hammack warned the Fed "might need to move even more." The Oct. 27 to 28 meeting tests which view holds.

The Long End Rallied Through the Heat

Treasuries rallied Tuesday as the cash market reopened. The 10-year yield then jumped to about 5.33% after Wednesday's consumer price report. It still closed lower that day. It fell about 10 more basis points Thursday, after the producer price report.

From last Friday to Thursday, the 10-year fell to 5.10% from 5.24%. The 30-year fell to 5.43% from 5.60%. The two-year barely moved, ending Thursday at 4.77%.

The Fed's Beige Book helps explain the split. Prices rose at a moderate or robust pace in 11 of 12 districts. Only two reported moderate growth. Retail sales outside autos and gas stations rose just 0.2%.

Investor Signal

A steady two-year and a falling 10-year can point to tight policy now and slower growth later. Fed Governor Christopher Waller said high long yields already do "a little bit of the work." If the 10-year holds near 5.1%, mortgage rates could ease. Freddie Mac's next weekly survey will show whether relief reaches home buyers.

AI's Borrowers Got Repriced

The week's sharpest move came in credit. CoreWeave's (CRWV) 2032 notes traded near a 15% yield Wednesday. Its stock fell 15.5%.

Default insurance on Oracle (ORCL) hit a record 288 basis points. Swaps on CoreWeave passed 1,000 basis points. CoreWeave hit a 52-week low of $59.51 Thursday, bounced, then fell about 12% Friday afternoon.

Loans told the same story. A $5 billion AI loan for Volta was marketed at about 11%. It priced at 95 cents on the dollar, below the 97 to 98 cents first offered. Big lenders are exploring sales of data-center loan risk, the Financial Times reported.

BlackRock's (BLK) Larry Fink said, "I'm seeing genuine shortages of capital."

Investor Signal

Treasury yields fell, but these borrowers paid more. A lower benchmark helps only if the spread on top holds. Higher costs on each new loan could trim how much they build. A bond sale at lower yields would be the first sign of relief.

Chip Demand Held. Chip Stocks Did Not.

Taiwan Semiconductor (TSM) beat its own sales forecast. It raised its 2026 revenue growth forecast to about 44%. ASML (ASML) said its planned supply "will not fully meet the demand" in 2027 or 2028.

Shares fell anyway. TSMC's U.S. shares fell Thursday and again Friday. Micron (MU) fell on four of five days and was down about 13% for the week by Friday afternoon. Korea's Kospi tripped a trading curb Tuesday and lost seven straight sessions before Friday's bounce.

Broadcom (AVGO) chief Hock Tan named the limit Monday. Capital "might be the biggest constraint," he said.

Investor Signal

No supplier reported weaker orders. What changed is how much investors will pay for the chain that depends on borrowed money. TSMC flagged caution for 2027 as rising part costs squeeze consumer markets. Its 2027 spending plan, usually given in January, is the next read.

Banks Lent to Traders and Kept Less Cushion

Stock trading carried the big banks' quarter. At Goldman Sachs (GS), revenue from financing stock clients rose 96% to $3.37 billion. That topped its trading with them.

Capital ratios slipped at JPMorgan (JPM), Goldman and Wells Fargo (WFC). JPMorgan cut net buybacks to $664 million. All four Tuesday reporters closed lower, with Citigroup (C) down 5.6%.

Bank of America (BAC) admitted it willfully violated the Bank Secrecy Act. Federal penalties top $1.21 billion. Morgan Stanley (MS) beat forecasts and still traded lower.

Investor Signal

Banks are earning more by funding clients' bets. That grows their balance sheets faster than their capital. It also suggests their profits rest on the same appetite for leverage that strained AI credit. Reserve builds next quarter will show whether that risk is spreading.

The Gulf Kept Oil's Premium in Place

Brent settled at $106.65 Monday and traded near $109 Friday afternoon. Attacks kept the risk alive. An Aramco building in Dhahran was struck Tuesday. The container ship GFS Pride sank near Hormuz after a projectile strike, Singapore said.

Supply rose too. Saudi Arabia said it pumped more than 2 million extra barrels a day in September. Two Iranian officials told Reuters that Tehran aims to keep crude high through the U.S. elections.

Diesel stayed tight. The IEA said that market will stay tight "well into 2027." Its members agreed Thursday to finish releasing 100 million barrels of emergency stocks. Transport and warehousing prices rose 3.4% in September, as diesel moved through supply chains.

Investor Signal

Fuel drove much of both price reports. That makes the Gulf a direct input to the Fed's next choice. Brent held its gains despite more Saudi oil and released stocks. A U.S. strike order or a firm reply from Tehran would move crude and the rate outlook together.

The week settled the demand question for now. Chipmakers still cannot build fast enough.

It opened a harder one. Money got cheaper for most borrowers and dearer for those building AI. Inflation, the Gulf and the Fed will set the price of money. Lenders will decide who still gets it.