What Happened Yesterday
Wednesday, October 14. Wall Street turned into a loan officer. Everybody who came in asking for money got asked for proof of income, two forms of ID, and a co-signer.
The 30-second version: inflation came in a bit hotter than expected, chip and AI stocks had their worst day in a while because people suddenly worried about how much those companies owe, and wholesale prices this morning were even hotter. If your 401(k) is heavy on tech, you felt this one.
Close | Move | Mood | |
|---|---|---|---|
S&P 500 | 7,718.94 | -1.11% | Pulled its credit report |
Nasdaq Composite | 26,692.87 | -1.88% | Application denied |
Dow | 51,621.48 | -0.09% | Had a co-signer |
Small caps (fund) | 271.37 | -1.93% | Never gets approved anyway |
Chip index (SOX) | 11,684.38 | -4.30% | Sent to collections |
VIX (fear gauge) | 16.87 | +10.48% | Woke up |
10-Year Treasury | 5.19% | Down from 5.22% Tue | Jumped, then hid under the desk |
Gold (fund) | 375.99 | -1.49% | Sold to cover the bill |
Oil (fund) | 153.56 | +0.31% | Still climbing |
Bitcoin | $81,562 | -1.84% | Also asked for ID |
The S&P 500 fell 86.51 points. The Nasdaq Composite fell 511.51. The Dow lost just 48.62. For the rows marked "fund," the move is what matters, not the price. Health care (+2.53%) led. Tech (-2.98%) was the worst of the 11 sectors. Only three of 11 rose.
The Inflation Report Matched on the Cover
The Fine Print Ran Hot
The headline number delivered on its promise. Consumer prices rose 0.6% in September, exactly as forecast, according to the Labor Department. Year over year, that's 3.7%, a tick above the 3.6% most forecasters expected. Gas did the heavy lifting: it rose 9.1% in one month, about half of the total increase.
The part the Fed watches closest is the "core" number, which skips food and gas because they bounce around. It rose 0.3%, above the 0.2% forecast. That sounds tiny. It's the difference between "your rent went up" and "your rent went up and they started charging for the parking spot."
Then the bond market got weird. The 10-year Treasury yield, which steers mortgage rates, jumped to about 5.33% during the day, then closed lower at 5.19%. Money flowed out of stocks and into government bonds, pushing their yields down. Fed Vice Chair for Supervision Michelle Bowman, who votes at every rate meeting, said in Bangkok there's time to "wait and see" before another hike, per Reuters.
Polymarket, a site where people bet real money on events, now puts an October 28 rate hike at about 28%, up from about 18.5% yesterday morning. Not likely. Not a joke anymore either. One "0.3% instead of 0.2%" is a small number. It's also a nearly 10-point swing in the odds that your borrowing gets more expensive this month.
The AI Boom Applied for a Loan. The Bank Called Its References.
Here's the chain. Hot inflation means rates stay high. High rates make borrowed money expensive. And some AI data-center builders have borrowed a lot.
CoreWeave, which rents out AI computing power, fell 15.46%. It loses money and owes nearly $50 billion, Seeking Alpha reports. Some of its bonds trade at 77 cents on the dollar, which the market is saying means, "We'll take the IOU, but only at a discount." Oracle fell 8.83%. The cost of insuring Oracle's debt against default hit a record, per Reuters.
The trigger: AI lab Anthropic reportedly told investors at a closed meeting that its third-quarter revenue hit $16.8 billion, up about 45% in three months, per Yahoo Finance and Investing.com. Anthropic hasn't publicly confirmed the figures. Huge number. But it put a spotlight on who pays for all those computers, and with whose money.
Then the chipmakers got dragged in. AMD fell 5.73%, Micron 4.10%, Nvidia 3.16%, Broadcom 3.10%. The chip index (SOX, a basket of 30 big chip stocks) dropped 4.30%, its sixth straight loss and now 11.6% below where it closed last Tuesday. Baird strategist Ted Mortonson told Yahoo Finance the street is "tiring of the Bank of Nvidia, the Bank of AMD and the Bank of Broadcom," meaning chipmakers that help fund their own customers.
Nobody said AI demand is fading. Taiwan Semiconductor just reported record profit this morning. The question changed from "how much will they sell?" to "who's paying, and is that money borrowed?" When a loan officer starts asking that, the pay stubs had better be real.
Bank of America Paid a $1.2 Billion Fine
It Still Plans on Rate Hikes
Bank of America fell 4.76%. It earned 91 cents a share, below the $1.09 analysts expected, per Visible Alpha via Seeking Alpha. The big drag: a $1.2 billion Treasury Department fine for failures in its anti-money-laundering and sanctions checks. That cost 17 cents a share. Add it back, and you get $1.08. Still a penny short. Ouch twice.
The quiet detail: the bank's own forecast for its lending income assumes three more Fed rate hikes, in December, March and June, its finance chief said on the call. A bank budgeting for rate hikes is like your landlord penciling in next year's rent increase before you've signed.
Morgan Stanley beat forecasts on strong stock trading but still fell 2.75%. JPMorgan, which got hammered Tuesday, rose 1.16%.
Bank of America said its credit card loss rate improved from last quarter. So regular customers are still paying their bills. The bank's own compliance paperwork cost $1.2 billion. Turns out "know your customer" is a rule, not a slogan.
Quick Hits: Toothpaste, Oil, and the $1,000 Test
Everyone ran to the boring aisle. Health care rose 2.53% and consumer staples, the companies that sell toothpaste and cereal, rose 2.22%. When people get nervous about chips, they buy stuff you need even in a recession.
Oil climbed a fifth straight day. US crude settled at $95.24 a barrel Wednesday and Brent, the global price, at $105.82, per Seeking Alpha, on new attacks on tankers near the Strait of Hormuz.
The $1,000 test: $1,000 in the S&P 500 on January 1 is about $1,128 today, down from $1,140 on Tuesday. Twelve bucks. Enough for a sad lunch.
What to Watch Today
Thursday, October 15 (all times CT). The 7:30 AM numbers are already out, and they're hot.
Already out: wholesale prices (PPI, what businesses pay each other). Up 1.3% in one month, more than double the 0.5% to 0.6% forecast, and 6.3% from a year ago against about 5.3% to 5.5% expected, per the Labor Department. Without food, energy and store markups, up 0.5% vs. 0.3% expected.
Already out: retail sales. Shoppers spent 0.8% more in September vs. a 0.3% forecast, per the Census Bureau. Some of that is just because gas is pricier. Jobless claims: 199,000, still under 200,000, so layoffs remain rare.
Chips: Taiwan Semiconductor reported record profit, up about 69% from a year ago, and forecast up to $54.3 billion in sales this quarter, per Yahoo Finance. Its US-listed stock was still down about 2.6% early this morning. Overnight, South Korea's main stock index, the Kospi, closed down 7.57%, dragged down by chip stocks.
More banks, before the bell: Charles Schwab (forecast $1.66 a share), PNC ($4.97), US Bancorp ($1.32).
Fed talk: Cleveland Fed's Beth Hammack speaks at 3:30 PM. She votes this year, and back in August she said more than one hike would likely be needed. Fed Chair Kevin Warsh does a fireside chat in Bangkok at 10:30 PM.
Rate odds: Polymarket puts an October 28 hike near 28% and a December hike near 79.5% (pulled about 8:00 AM).
The one thing that could ruin everyone's day
The two stories become one story. Hot wholesale prices push the Fed toward an October hike. A hike makes borrowing pricier. Pricier borrowing is exactly what spooked the AI builders yesterday. If Hammack sounds like she's ready to hike this month, the loan officer raises the rate on every application in the building.
Yesterday, Wall Street asked the AI boom for its pay stubs. This morning, inflation asked Wall Street for its pay stubs.
Follow us on X and Instagram for daily market updates
Markets don't wait, and neither do we. Follow Tracking the Trade for fast takes, the numbers that matter, and the occasional meme that hits a little too close to your portfolio.
Instagram: @trackingthetrade
Nothing here is investment advice. We are a newsletter, not your fiduciary, and our only position is that the market is funnier than it thinks it is. Do your own homework.