CPI Beats Forecasts as Shelter and Gas Prices Drive Gains
Markets pulled back slightly last week as fresh inflation data and a rise in long-term interest rates renewed concerns about policy tightening. The S&P 500 lost 0.4%, the NASDAQ declined 1.1%, and the Dow edged down 0.1%.
The Consumer Price Index (CPI) rose 0.6% in August, topping forecasts. The year-over-year inflation rate reached 3.7%, driven largely by rising energy and shelter costs. This marked the largest monthly increase since June 2022.
Treasury Yields Climb as Rate Expectations Reset
Following the CPI report, the 10-year U.S. Treasury yield rose to 4.30%, its highest level in weeks. Rising yields pressured growth and tech stocks, while energy and financials held up relatively well. Utilities and other defensive sectors lagged.
As investors digest the latest inflation data, attention turns to the Federal Reserve’s September policy meeting, where officials are expected to keep rates steady but may signal a longer path to potential easing.
Sector Rotation Suggests Caution
While major indexes declined, the underlying sector trends reflected a cautious shift. Energy and financials outperformed, indicating strength in areas less sensitive to rate hikes. Meanwhile, small-cap and tech stocks weakened, reflecting the impact of rising borrowing costs.
Alphastar CIO Tony Parish noted:
“With headline inflation running hotter than expected in August, investors are now watching closely for signs that the Fed’s tone could turn more hawkish again.”
Here are three key considerations for investors:
-
Rising Yields Reflect Market Concern
The recent spike in Treasury yields signals caution around inflation and debt sustainability. Rate-sensitive sectors may face more headwinds if yields remain elevated.
-
Sector Rotation Underscores Macro Sensitivity
The outperformance of energy and financials suggests markets may be bracing for persistent inflation and a longer-term high-rate environment.
-
Fed Messaging Will Be Key Next Week
With inflation showing persistence, the Federal Reserve’s commentary following its upcoming meeting could shape near-term volatility across equity and bond markets.
Final Thoughts
The combination of above-forecast inflation and rising yields has slowed recent equity momentum. While the Fed is expected to hold rates steady in the near term, investors may benefit from monitoring shifts in tone, particularly if inflation remains stubborn into Q4.
Tony Parish summed it up clearly:
“If these hotter readings persist, that could challenge the Fed’s cautious optimism and revive talk of additional tightening.”
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Disclosure:
This blog post is for informational purposes only and should not be considered investment advice. Past performance does not guarantee future results. All data is as of September 15, 2025. Please consult with a qualified financial professional for personalized advice.
Inflation Surprise and Rising Yields Stall Markets: Week of September 15, 2025
CPI Beats Forecasts as Shelter and Gas Prices Drive Gains
Markets pulled back slightly last week as fresh inflation data and a rise in long-term interest rates renewed concerns about policy tightening. The S&P 500 lost 0.4%, the NASDAQ declined 1.1%, and the Dow edged down 0.1%.
The Consumer Price Index (CPI) rose 0.6% in August, topping forecasts. The year-over-year inflation rate reached 3.7%, driven largely by rising energy and shelter costs. This marked the largest monthly increase since June 2022.
Treasury Yields Climb as Rate Expectations Reset
Following the CPI report, the 10-year U.S. Treasury yield rose to 4.30%, its highest level in weeks. Rising yields pressured growth and tech stocks, while energy and financials held up relatively well. Utilities and other defensive sectors lagged.
As investors digest the latest inflation data, attention turns to the Federal Reserve’s September policy meeting, where officials are expected to keep rates steady but may signal a longer path to potential easing.
Sector Rotation Suggests Caution
While major indexes declined, the underlying sector trends reflected a cautious shift. Energy and financials outperformed, indicating strength in areas less sensitive to rate hikes. Meanwhile, small-cap and tech stocks weakened, reflecting the impact of rising borrowing costs.
Alphastar CIO Tony Parish noted:
Here are three key considerations for investors:
Rising Yields Reflect Market Concern
The recent spike in Treasury yields signals caution around inflation and debt sustainability. Rate-sensitive sectors may face more headwinds if yields remain elevated.
Sector Rotation Underscores Macro Sensitivity
The outperformance of energy and financials suggests markets may be bracing for persistent inflation and a longer-term high-rate environment.
Fed Messaging Will Be Key Next Week
With inflation showing persistence, the Federal Reserve’s commentary following its upcoming meeting could shape near-term volatility across equity and bond markets.
Final Thoughts
The combination of above-forecast inflation and rising yields has slowed recent equity momentum. While the Fed is expected to hold rates steady in the near term, investors may benefit from monitoring shifts in tone, particularly if inflation remains stubborn into Q4.
Tony Parish summed it up clearly:
READ THE FULL REPORT
Disclosure:
This blog post is for informational purposes only and should not be considered investment advice. Past performance does not guarantee future results. All data is as of September 15, 2025. Please consult with a qualified financial professional for personalized advice.