The Overnight RateThree moves
Prices and commodities. Final-demand producer prices rose 1.3% in September after 0.5% in August, the largest monthly advance since March 2022, and sit 6.3% above a year earlier, the most since December 2022 (BLS PPI). Goods jumped 2.6%, with energy up 10.8% and gasoline 20.3%; services rose 0.8%, and transportation and warehousing advanced 3.4%. Stripping food, energy, and trade margins, the core index still rose 0.5% on the month and 5.0% over the year. What businesses pay now feeds the next round of contracts and shelf prices. The counterpoint: that milder core shows the energy spike is not yet a broad services breakout. Our read: a 1.3% headline that clears Issue 027’s 0.7% bar still means energy is feeding business costs before it hits the receipt.
Fed and rates. At an IMF fireside chat in Bangkok, Chair Kevin Warsh gave no preview of the October or December path: “I don’t prejudge meetings,” and “I don’t believe in saying now what I might do at the meetings that we have in the balance of this year” (CNBC). Kalshi’s October hike contract last-traded near 14%, down from 28% in yesterday’s issue; December sits near 78% (Kalshi). Card and HELOC rates still track the prime rate that moves with the Fed. The counterpoint: hot CPI and hotter PPI usually lift hike odds, and they fell anyway. Our read: October looks like a pause bet, and December is where the path still lives.
AI and data centers. Texas Attorney General Ken Paxton sent letters to 156 data-center developments in 32 counties, telling them to file up-to-date water-use information as part of an investigation into projects that did not answer the Texas Water Development Board survey (Texas OAG). The counties include Harris, Dallas, Travis, Bexar, and Tarrant. Water reporting is the disclosure step before rate cases and siting fights show up on household bills. The counterpoint: a letter is not a fine or a shutdown. Our read: disclosure is the first billable cost of the data-center buildout in a dry state.
What could move prices
Northeast distillate stocks are thin into winter. EIA’s week ending Oct. 9 put East Coast distillate at 21.5 million barrels, down 22.3% from a year earlier, with New England at 2.5 million (-40.7%) and the Central Atlantic at 8.9 million (-32.9%) (EIA). NOAA’s December-to-February outlook favors warmer-than-average temperatures across much of the East, which helps (NOAA). What can still reprice overnight is the oil-heat rack that fills the small share of Northeast homes still on distillate. The trigger is the first hard freeze that empties light tanks. Our read: the warm map is the base case, and the inventory gap is the tail.
The calendar
BLS releases September U.S. Import and Export Price Indexes at 8:30 ET today (BLS). Import prices are the foreign cost of goods landing on the dock. We’d call a sharp monthly rise news that the PPI energy pass-through is still traveling, and a flat or down print news that import costs are cooling into the FOMC blackout.
Who pays: the Northeast oil-heat fill
Dealers still have to refill tanks against regional inventories that sit far below last year. The mechanism, once: the household fill is priced off the wholesale rack, and when PADD 1 stocks are this light a cold snap can lift that rack within days before the truck shows up. Payer: the oil-heat household in New England or the mid-Atlantic whose tank is light. Payee: the dealer and the wholesale seller. The counterpoint: NOAA’s warmer East map lowers the odds of a long cold season.
Net net: thin tanks turn a short freeze into a bill even when the seasonal outlook is mild.
Also moving
- Labor and consumers: Census advance retail sales rose 0.8% in September to $745.0 billion, but only 0.2% excluding fuel outlets; those outlets alone rose 6.4% (Census).
- Credit: U.S. Bancorp’s card net charge-off ratio fell to 3.29% from 3.80% a year earlier, even as it booked $135 million of initial provision on a bought small-business card book (U.S. Bancorp).
- Corporate money: Schwab ended the quarter with $187.9 billion of client margin loans, up 14% from the prior quarter, and took in a record $190.4 billion of core net new assets (Schwab).