The Overnight RateThree moves
Labor and consumers. Average hourly pay rose 0.1% in September while consumer prices rose 0.6%, so real hourly earnings fell 0.5% on the month and 0.7% from a year earlier (BLS Real Earnings). Gasoline did most of it: its index jumped 9.1% and accounted for over half of the monthly rise, leaving all prices 3.7% above a year ago (BLS CPI). Boston Fed contacts said workers were job hunting because raises lagged inflation (Beige Book). The counterpoint: core prices, which leave out food and energy, rose a milder 2.6% over the year. Our read: a pay cut led by the pump stays a pay cut until gasoline turns.
Corporate money. Bank of America booked a $1.2 billion charge for regulatory penalties in the third quarter, cutting earnings to $0.91 a share from an adjusted $1.08 (Bank of America). FinCEN said the bank admitted it willfully violated the Bank Secrecy Act, including failing to file suspicious activity reports (FinCEN). Its $1.2 billion penalty credits the OCC’s $750 million, the largest in OCC history (OCC). The charge can’t be deducted for taxes, so shareholders carry all of it, and the OCC’s share goes to the Treasury. The counterpoint: net interest income still rose 8% to $16.4 billion. Our read: the bank can absorb it once, and the cease-and-desist order from 2024 still stands.
Stocks and earnings. BlackRock took in $205 billion of net new money in the third quarter and ended it with $15.5 trillion under management, up from $13.5 trillion a year earlier (BlackRock). Its iShares ETFs drew $135 billion of that, and revenue rose 19%. CEO Laurence Fink said the firm is winning mandates “from hyperscaler financings to pension outsourcings,” and its AI Infrastructure Partnership made its first deployment. That’s retirement and brokerage money still flowing in while real pay shrank. The counterpoint: the release credits higher markets first for the revenue gain, and markets can give that back. Our read: it matches the Beige Book, where over half of Districts said spending is driven by high-income households.
What could move prices
NOAA’s National Weather Service releases its December-to-February winter outlook at 11:00 a.m. ET today, with a very strong El Niño in play (NOAA). The price at risk is heating oil, used by about 3% of US homes, mostly in the Northeast. EIA already expects heating oil to average 34% more than last winter and oil-heat spending to rise 21%, with milder Northeast weather absorbing part of the jump (EIA). The CPI’s fuel oil index was already up 74.2% on the year. Our read: a colder Northeast map today would make that 21% look light.
The calendar
BLS releases September producer prices at 8:30 ET today (BLS). Final-demand prices, what businesses get paid, rose 0.4% in August and 5.4% over the year (BLS PPI). We’d call a monthly gain of 0.7% or more news that energy is still feeding business costs, and 0.1% or less news that the pass-through is fading.
Who pays: the customer whose contract renews
All 12 District reports in the Fed’s Beige Book mentioned higher oil, and firms said diesel fuel surcharges were passing costs through the supply chain (Beige Book). AAA’s national diesel average is $6.32, against $3.66 a year ago (AAA). The mechanism, once: fixed-price contracts and fuel hedges delay the pass-through, and firms told the Fed they expect prices to rise further as those contracts expire and get renegotiated. Payer: the business customer on a renewing contract, and then the shopper. Payee: the carrier and the fuel supplier. The counterpoint: consumer-facing firms say price-sensitive customers keep resisting hikes.
Net net: the diesel bill reaches most prices on a lag, at renewal time.
Also moving
- Fed and rates: Kalshi’s October hike chance gained nine points on the CPI, to 28% (Kalshi); card rates follow any hike.
- Credit: Bank of America’s card charge-off rate fell to 3.22% from 3.46% a year earlier (Bank of America); borrowers are still paying.
- AI and data centers: Five Fed Districts said some firms cut or delayed hiring after AI productivity investments (Beige Book); job seekers pay first.