Inflation heated up in September both at the checkout counter and at the wholesale level. Consumer prices (CPI) rose 0.6% for the month, lifting the annual inflation rate to 3.7% from 3.4% in August. Gasoline jumped 9.1% and caused more than half of the increase, but prices outside of food and energy also rose faster than expected, with core inflation at 2.6%. Wholesale prices told a similar story. The Producer Price Index jumped 1.3% in September, its biggest monthly gain since March 2022, and is now up 6.3% from a year ago. Historically, businesses tend to pass some of these costs on to shoppers and that impact could be felt in the months ahead (perfect timing for the holidays, of course!). Our financial markets briefly saw the odds of another Fed rate hike this month, but, by today, the focus has shifted back to December after Treasury yields eased and Fed Chair Kevin Warsh gave no hint of a move. One bit of good news: oil prices held fairly steady this week, with Brent crude holding just above $100 a barrel, and gas prices having leveled off and hovering near $4.34 a gallon on average.
So how is the consumer holding up? Retail sales rose a better-than-expected 0.8% in September, but gas stations accounted for most of that gain. Excluding gas, sales rose just 0.2%, and after adjusting for inflation, spending was close to flat. The big banks, which see household spending firsthand, painted a healthier picture. JPMorgan said card spending rose 10% from a year ago, and fewer customers fell behind on their credit cards. Wells Fargo said that while consumer sentiment is mixed, its customers are doing well, and Bank of America reported steady growth in loans and deposits. Goldman Sachs and Morgan Stanley both beat expectations on strong trading results. However, the Fed’s latest survey of business conditions found that spending has stalled in most regions and is being driven largely by higher-income households. Meanwhile, the savings rate has fallen to its lowest level since 2022, which tells us many families are dipping into their cushion to keep up. Housing remains stuck also. Existing home sales rose 1.5% in September, but remain well below the typical 4 million units sold a year. With mortgage rates rising to 7%+, many buyers are simply staying on the sidelines for now.
Higher inflation and debt levels rattled our markets this week to some degree, particularly on the technology side. Investors worry that rising interest rates will make it harder for companies to pay for their massive investments in artificial intelligence, as many of these companies already carry a lot of debt. We know there will be “bumps” in the road as this new and rapidly growing technology continues to expand. We have to keep in mind that pullbacks like this are normal, especially after a long run-up, and it’s a good reminder of why we stay diversified rather than relying on a handful of companies.
There is some welcome news for retirees. The Social Security Administration announced a 3.6% cost-of-living adjustment for 2027, the largest since 2023. This is approximately $75 more per month for the average retiree starting in January. This adjustment mostly keeps pace with rising prices, and Medicare premiums will likely absorb a big part of the increase. For savers, higher rates keep interest bearing investments attractive. For borrowers, it is a good time to pay down credit card balances and avoid new variable-rate debt. For now, we will remain focused on how the Federal Reserve digests this latest round of data points for signs of the next logical move.
Interesting to Note
Curious about how the upcoming mid-term elections might impact our current environment? We invite you to a timely webinar, “Votes & Volatility: How Midterm Election Outcomes May Shape the Investment Landscape,” on Wednesday, October 28, at 1:00 PM CT / 2:00 PM ET. Jennifer Flitton (Invesco) and Ben Cantrell (BlackRock) will join our own Kara Murphy (Kestra Investment Management) to discuss what it may mean for markets and Main Street.
You can register here – Webinar Registration – Zoom
Looking Ahead
• Next Fed meeting (Oct. 27–28): Markets will watch whether the next rate hike comes now or in December.
• Inflation and economic growth (Oct. 29): The Fed’s preferred inflation gauge (PCE) and the first look at third-quarter GDP.
• Midterm elections (Nov. 3): Elections can stir short-term noise but have historically had little lasting market impact.
Have a nice weekend!
Written by: Chris Wasson, CFP®
Sources
BLS: Consumer Price Index, September 2026
CNBC: Wholesale prices jumped 6.3% annually in September, biggest gain since 2022
AP: Retail sales up a better-than-expected 0.8% in September
NAR: Existing-Home Sales Increased 1.5% in September
PYMNTS: JPMorgan Card Spending Hits $539 Billion as Credit Improves
SEC: Wells Fargo Third Quarter 2026 Earnings Release
Investing.com: Bank of America stock falls 4% on third quarter earnings miss
SEC: Goldman Sachs Third Quarter 2026 Earnings Results
SEC: Morgan Stanley Third Quarter 2026 Earnings Results
investingLive: Fed’s Beige Book: Nine of 12 districts report growth as price pressures broaden
BEA: Personal Income and Outlays, August 2026
CNBC: Nvidia, AMD, Micron fall as AI stock sell-off deepens
TheStreet: Stock Market Today (Oct. 15, 2026): Dow edges higher as tech sell-off pivots
Reuters: Wall St futures mixed as tech wobbles again, Tesla gains
Benzinga: October Fed Hike Odds Collapse After Warsh Remarks
SSA: Social Security Announces 3.6 Percent Benefit Increase for 2027
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