On Friday evening, WTI crude closed above $100 a barrel while the Nasdaq lost 2.3% in a single session. Between the two: stronger-than-expected US inflation and a Fed chair who carefully avoided taking a clear position. Each market had its own week, and the narratives do not all line up.
In brief
- The Nasdaq Composite shed 4.5%, its worst week since late June, weighed down by doubts over artificial-intelligence funding.
- WTI ended Friday at $101.37, up $3.40 on the session, amid fears of an escalation involving Iran.
- US producer prices jumped 1.3% in September, versus 0.6% expected. The Fed meets on October 27 and 28.
AI rattles Wall Street
The sharpest blow did not come from the economic calendar, but from rumors. On Thursday, there was talk of an AI-focused fund in trouble. By Friday, the rumor had grown, and the “neoclouds”—companies that rent out computing power—plunged again. According to investingLive’s session recap, the market feared that CoreWeave might issue shares to repay its debt. The SOX semiconductor index fell for an eighth straight session.
On Friday, the Nasdaq lost 2.3% and the S&P 500 fell 1.2%. For the week, according to Yahoo Finance, the Nasdaq Composite dropped 4.5%, ending a month-long advance. The Dow Jones, meanwhile, rose: capital flowed out of tech and into more traditional stocks.
Focus on the nature of the shock. No macroeconomic figure brought tech down. The problem is credit: who will pay for the promised data centers, and at what cost? That doubt does not disappear in a single session. It returns in waves, as earnings and debt issuance unfold.
Inflation: Warsh stays silent, the data speaks
On Wednesday, the consumer price index came in at 3.7% year over year, versus 3.6% expected and 3.4% the previous month. Core inflation followed the same pattern: 2.6%, versus 2.5% expected. One tenth too high across the board, with no technical excuse. Our guide to the measured impact of CPI tracks the market’s reaction to each release.
On Thursday, the shock came upstream. Producer prices climbed 1.3% in one month, more than double the 0.6% expected. Year over year, they surged 6.3%, according to CNBC. Retail sales appeared solid, at +0.8% versus +0.3% expected. But fuel explains almost everything: excluding gas stations, sales rose only modestly, FXStreet notes. Consumers are paying more, not buying more.
The Fed, for its part, played for time. Bets on an October rate hike rose to 50% after the CPI release, then fell back on Thursday, Axios reports, citing CME’s FedWatch tool. On Friday in Bangkok, Kevin Warsh revealed nothing: “I do not prejudge meetings.” The market interpreted that as a pause, and the probability of a hike fell to 15% on Friday morning. Goldman Sachs expects a pause in October, followed by a “second and final hike” in December.
When the market assigns only a 15% chance to a hike while producer prices are rising 6.3% year over year, any surprise on October 28 can only go one way.
Oil: beware the weekend
Crude did not wait for the Fed. On Wednesday, WTI ended at $95.12, driven by escalating Houthi attacks on Saudi Arabia, according to investingLive. On Friday, it closed at $101.37 after an afternoon surge that was partly unexplained. The most frequently cited explanation: the risk of a US response against Iran over the weekend, as the Islamic Revolutionary Guard Corps had reportedly ordered military bases to be evacuated.
In practical terms, a tense weekend means a market is closed while the news keeps moving. On Monday, prices may open far beyond your stop, with the order filled at the first available price. Any position held over Friday night in oil, gold or the indices carries this risk.
Dollar, rates, gold: familiar reflexes break down
The week’s paradox: despite high inflation, the dollar fell. investingLive sees a correlation between AI investment and the greenback. Capital that had moved in to bet on US tech growth is leaving as that growth falters. On Friday, the New Zealand dollar led the pack while the US dollar brought up the rear.
Long-term yields followed equities rather than inflation. The US 10-year yield fell from 5.19% on Wednesday to 5.09% on Friday. That does not make the budget outlook any more reassuring: the more the Fed raises rates, the larger this budget line becomes.
Gold, too, is defying its usual patterns. A war in the Middle East should support it. Yet it plunged $54 on Wednesday, to $4,103 an ounce. The market is reasoning through the chain reaction: higher oil prices, higher inflation, a tougher Fed, and a non-yielding metal that becomes less attractive. On Friday, the ounce ended at $4,168, with $4,200 in sight as the main obstacle.
Elsewhere: Sydney slides, Tokyo turns more hawkish
In Australia, employment fell by 39,300 jobs in September, while the consensus expected 19,600 additions. Unemployment rose to 4.7%, its highest level in five years, and the Aussie lost ground. In the UK, monthly GDP released on Thursday rose 0.1%, whereas a 0.1% decline had been expected.
In Tokyo, Kazuo Ueda repeated that the Bank of Japan would continue raising rates as core inflation moves closer to 2%. In the eurozone, September inflation was confirmed at 3.8% year over year. Most central banks are tightening at the same time. Warsh summed it up in his own way: there is “no free rider.”
In crypto, the liquidation wave described here on Wednesday has already flushed out some of the leverage. Two threads now deserve attention: the Nasdaq, which bitcoin remains closely tied to when tech falls, and the dollar.
Next week: inflation outside the United States
The Fed enters its blackout period ahead of its October 27–28 meeting. London, Ottawa and Wellington take over.
| Date | Release | Forecast | Previous |
|---|---|---|---|
| Tuesday 20, 8:00 a.m. | UK, 3-month/year wage growth | 3.8% | 3.9% |
| Wednesday 21, 8:00 a.m. | UK, year-over-year CPI | 3.4% | 3.1% |
| Wednesday 21, 11:45 p.m. | New Zealand, quarter-over-quarter CPI | 0.8% | 1.5% |
| Thursday 22, 2:30 p.m. | US, jobless claims | 200,000 | 199,000 |
| Friday 23, 9:30 a.m. | Germany, flash manufacturing PMI | 54.0 | 53.8 |
| Friday 23, 3:45 p.m. | US, flash manufacturing PMI | 55.6 | 57.0 |
| Friday 23, 3:45 p.m. | US, flash services PMI | 57.9 | 58.7 |
The main event is UK inflation: the consensus expects it to accelerate from 3.1% to 3.4%. The bar is already high for sterling. In Canada, the federal budget is due Tuesday evening, the day after CPI. Times are Paris time. Edgyx’s economic calendar shows the average move measured during previous releases for each data point—enough to set a stop before the release rather than after it.
But first comes Monday’s open. Here is how to size a position held over the weekend.
Key takeaways
- The stress came from AI funding: the Nasdaq lost 4.5% over the week and the SOX posted eight straight declining sessions.
- US inflation is accelerating (CPI at 3.7%, producer prices up 1.3% month over month), but the market has largely stopped believing in a Fed hike on October 28.
- With crude above $100, size your weekend positions for an opening gap, not just for your stop.
- The dollar is following tech, while gold is suffering from rate expectations: recheck the usual correlations before every trade.
