What Happened Yesterday
Wednesday, September 30. Last day of the quarter.
Close | Move | Mood | |
|---|---|---|---|
S&P 500 (SPY) | 762.63 | -0.21% | Quietly sold |
Nasdaq 100 (QQQ) | 739.77 | +0.25% | Only one at the party |
Dow (DIA) | 508.55 | -0.84% | Worst of the four |
Russell 2000 (IWM) | 277.89 | -0.40% | Still limping |
VIX | 16.34 | +1.87% | One eye open |
10-Year Treasury | 5.29% | +3 to +4 bp | Highest since 2002 |
30-Year Treasury | 5.63% to 5.64% | +5 to +6 bp | Highest since 2002 |
Gold (GLD) | 380.84 | -0.54% | Sulking |
Oil (USO) | 145.66 | +1.61% | Bounced off the pipe news |
Bitcoin | $83,554 | -0.08% | Still asleep |
The S&P 500 index closed at 7,651.54 (-0.25%). The Nasdaq Composite finished at 26,861.06 (+0.24%). The Dow lost about 444 points to 50,906.05. Yields show EODHD and Treasury's own curve. Bitcoin is the UTC-day bar.
Inflation Cooled. Partly Because Someone Bought a New Scale.
The Bureau of Economic Analysis's August PCE report (the inflation gauge the Fed actually targets, not CPI) came in soft. Core prices, minus food and energy, rose 0.2% on the month, below the 0.3% forecasters wanted. The yearly core rate dropped to 3.0%, well under the 3.3% expected. Headline PCE ran 3.4% a year, versus 3.7% expected.
Great news. Now the fine print. This was the agency's annual cleanup, and it changed how it measures prices for three things: portfolio management fees, legal services, and software. It applied the new math back to 2021. Independent tallies say the switch shaved roughly a third of a point off July's yearly core rate. That's most of the "miss" right there.
It's the diet plan where you lose five pounds by buying a scale that reads five pounds light. Is it wrong? Maybe not. The old way priced money-manager fees partly by counting staff. Still, it's a new ruler, and the market noticed.
Meanwhile, Americans spent 0.9% more in August while their income rose 0.2%. After inflation, disposable income didn't grow. People are buying more with a raise they didn't get.
Inflation didn't break. It got re-measured. Some of that is honest housekeeping, and it still leaves core at 3%, a full point above the Fed's 2% goal. You can repaint the speedometer. The car is still doing 3.
The Fed Blinked. The Bond Market Didn't.
Traders took the soft number and ran. Odds of an October hike fell to about 35% on CME FedWatch (the scoreboard built from futures bets on Fed meetings), from roughly 71% a week ago and about a coin flip on Tuesday. The 2-year yield, the market's guess at the Fed, barely moved, around 4.9%.
The long end ignored it all. The 10-year closed at 5.29% and the 30-year at about 5.64%, both the highest closes since 2002. For September, the 10-year rose about 0.53 points, its biggest one-month jump since September 2022.
Why would long bonds sell off on good inflation news? Because the 30-year doesn't care about October. It cares about whether anyone believes inflation will return to 2% over the next decade, and "we changed the measuring tape" isn't the most convincing argument ever made.
The Fed controls the front of the curve. Lenders control the back. Your mortgage is priced off the back. So the Fed might skip October, and your 30-year rate still goes up, which is a fun thing to explain at Thanksgiving.
September Report Card:
The Nerds Passed, Everyone Else Got Detention
The month closed on a split screen. Per EODHD closes:
Nasdaq Composite: +1.86% in September. AMD alone gained about 30%. Meta: 27%.
S&P 500: -0.45%. A shrug, in the historically worst month of the year.
Dow: -4.29%. Ouch.
Russell 2000 fund (IWM): -5.46%. Bigger ouch.
Wednesday was the same movie, just on a different day. Ten of the 11 sector funds fell. Consumer staples led the losers, down 1.53%. Tech, +0.64%, was the only green one.
The data wasn't the problem. ADP said private employers added 90,000 jobs in September, beating the 70,000 forecast. The Chicago PMI, a regional survey of purchasing managers, jumped to 58.8 from 47.1, the highest since May. Anything over 50 means growth.
Strong data plus high yields is bad for anyone who borrows money to run a business. That's the Dow and small caps. The AI giants mostly pay cash. So September rewarded the companies that don't need a bank, which is a tough lesson for everyone who does.
Micron Had Its Best Quarter Ever
The Stock Shrugged
After the bell, Micron reported record revenue of $54.2 billion, about 379% more than a year ago and above the roughly $51 billion Wall Street expected. It beat on profit too. It guided next quarter to $60 billion to $63 billion, well above estimates. Long-term customer commitments rose to $32 billion from $22 billion in June. Data center revenue grew more than 11-fold.
The stock barely moved after hours.
The $1,000 test: $1,000 in Micron on June 30 was worth about $923 at Wednesday's close. That's after the best quarter in the company's history.
When a stock has run this far, "record quarter" is the price of admission, not the show. Micron says it can't see when supply catches up to demand. The market heard that and asked, "sure, but what about 2028?"
What to Watch Today
Thursday, October 1 (all times CT). First day of Q4.
Early morning: Challenger job-cut announcements for September.
7:30 AM: Weekly jobless claims from the Labor Department. Forecast is about 200,000.
9:00 AM: ISM manufacturing for September. Forecast 55. Watch the prices index too, expected near 72. That's the inflation the new ruler doesn't touch.
Fed speakers, all voters: Governor Christopher Waller at 9:00 AM, Vice Chair Philip Jefferson at 12:30 PM, Vice Chair for Supervision Michelle Bowman and New York's John Williams in the afternoon, and Dallas's Lorie Logan this evening. Boston's Susan Collins and Kansas City's Jeff Schmid also speak (neither votes this year).
After the close: Nike. Wall Street expects about 44 cents a share, a nickel below a year ago, on revenue down about 3%, per Barron's. The stock fell 13.76% last quarter. The bar is at limbo height.
Oil watch: Iran says it received a US counterproposal to its seven-day Hormuz plan through mediators. Status: a reply, not a deal.
Coming up: September jobs land Friday at 7:30 AM. The forecast is about 90,000, down from 162,000 in August, with unemployment at 4.1%.
The one thing that could ruin everyone's day
A hot ISM prices number with the 10-year already at 5.29%. Wednesday's soft PCE bought the Fed a little patience. One factory survey showed prices still running hot, and the bond market gets to say "told you" in front of five Fed voters on the same day.
The government got a new scale. The bond market kept weighing itself on the old one.
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