PPI Shows Red Hot Inflation Pressure: 8 Key Items Shaping the Stock Market Thursday

These are the early headlines and other items poised to influence the market at the start of trading Thursday. As we share this collection of market drivers, U.S. equity futures point to a mixed market open.

1. Wholesale inflation was much stronger than expectations last month, posting the largest monthly advance since 2022. The producer price index for total final demand rose 1.3% in September, translating to growth of 6.3% year over year, the Bureau of Labor Statistics reported Thursday. The September increase is the largest advance since March 2022, the BLS reported. That blew past expectations. Economists surveyed by FactSet expected PPI to rise 0.5% month over month after wholesale inflation rose 0.4% in August. Producer prices were up a revised 5.6% year over year in August. (Barron’s)

Following yesterday’s warmer-than-expected September CPI report, I cautioned that we still faced the September PPI data today, and as we can see, it came in much, much hotter than the market expected. Clearly, it pays to not only collect data, like the monthly PMI reports, but also to triangulate what they say.

Mixing the back-to-back, hotter-than-expected CPI and PPI reports, it’s hard not imagine the probabilities for Fed rate hikes don’t shift even further today. As of early this morning, and well before the September PPI report, that tool showed a 70.7% chance the Fed maintained the Fed funds rate following its October 29 meeting and a 66% probability for a 25-basis point rate hike in early December.

2. Shoppers showed their willingness to spend in September even after a better-than-expected splurge in August. Retail sales increased a better-than-expected 0.8% last month, after delivering a revised 1.3% gain in August, according to the Commerce Department’s report Thursday. Economists were anticipating a 0.3% increase for the month, according to FactSet. Excluding business at gas stations, retail sales rose 0.2% in September. The government figures aren’t adjusted for inflation, which accelerated last month as gasoline and many other goods and services became more expensive. (AP News)

On the one hand, folks are likely to be surprised by the stronger-than-expected print for the September Retail Sales report, up 6.3% year over year and 0.8% month over month vs. the 0.3% market consensus. Here’s the thing, though, retail sales at gasoline stations jumped 28.1% compared to September 2025 and soared 6.4% higher compared to August. But even adjusting for that, consumers continued to open their wallets at the quickest pace in the September quarter with accelerated year-over-year gains in nearly every category.

And for us at the Pro Portfolio, the only thing more impressive was the adjusted U.S. comp sales of 8.0% for September posted by Costco (COST). When we look at the September CPI and PPI data, we continue to see that company taking consumer wallet share as we move into the year-end holiday season.

3. Anthropic told investors that its third-quarter revenue had jumped nearly 50 per cent to $16.8bn and that the company was profitable, as the AI group looks to rally support for a blockbuster IPO amid concern about the AI trade. Its rapid growth is slower than the blistering pace set earlier in the year and below the expectations of some of Anthropic’s backers, according to investors and analysts… The $965bn start-up told investors that it was profitable on an adjusted basis in the three months to September for the second quarter in a row, according to multiple people with knowledge of the matter. Revenues were up from $11.5bn in the three months to June. (FT)

What Anthropic did not share was an update to its annualized revenue, which hit $65 billion at the end of July. However, research firm SemiAnalysis pegs Anthropic’s sales grew to around $74 billion based on the new figures. That’s a slower rate of growth compared to the $100 billion year-end 2026 run rate Anthropic discussed a few months ago. We think this will influence the accorded valuation for the company’s upcoming IPO, and the roadshow for which is expected to kick off the week of November 9.

During that roadshow, we will be quite interested in updated figures for Anthropic’s multi-year capex plans. Previously, the company shared plans to spend more than $500 billion on infrastructure and compute over the next decade. As you can imagine, the updated figure will have implications on companies riding the AI and data center infrastructure build-out.

4. While Taiwan Semiconductor Manufacturing Co said demand was “extremely robust” and it sees no sign of a slowdown in what it calls the AI mega trend, the company was being cautious in its business planning… “Looking ahead, we continue to observe consumer and price-sensitive end-markets segments are being challenged due to the impact of rising component prices and macroeconomic uncertainties,” Chief Executive C.C. Wei said on an earnings call. “As such, we are being prudent in our business planning going into 2027.” However, it reiterated that demand far exceeds its supply capacity, with the expectation that its 2026 full-year revenue grows by about 44%, up from a previous forecast of greater than 40% last quarter. The company also said the emergence ⁠of agentic AI central processing units and continued demand for networking chips would drive future silicon demand. (Reuters)

5. The smartphone market suffered its worst decline on record in the September quarter, after rising memory costs pushed shipments down 22% with worse to come, according to market researcher IDC. The higher cost of storage over the past year, led by demand from AI industry orders, has hurt profitability across the mobile sector and forced companies to raise prices, cut back specifications and discard budget-focused models, IDC said. Chinese brands like Xiaomi Corp. and Oppo took the worst hit among the top names, while Apple Inc. and Samsung Electronics Co. fared better due to their larger premium handset portfolios…. “Current indicators suggest that the market has not yet reached the bottom,” said IDC research director Nabila Popal. “Memory costs have surged approximately 350% since last year and are still rising, creating substantial pressure on vendor margins and shipments. The worst is yet to come.” (Bloomberg)

Reading between the lines of the comments from Taiwan Semiconductor (TSM) and IDC, we see continued strength in AI and data center demand, TSM’s largest segment, while demand at smartphone, TSM’s second largest segment, is under pressure due to higher component costs, namely memory. Understanding that and the prospect for continued pressure in the smartphone and PC markets, TSM’s Q4 2026 revenue guidance of $52.3 to $54.3 billion, up more than 60% year over year points to continued strength in AI and data center demand.

We also see that tight chip capacity hitting the smartphone, PC and other markets supporting the vibrant multi-year outlooks shared earlier this week from ASML (ASML) and Applied Materials (AMAT). Alongside its Q3 2026 results, TSM maintained its capital spending expectation for 2026 at $60 billion to $64 billion, up more than 50% year over year.

6. Apple Inc. is gearing up to release its artificial intelligence platform in mainland China, following a lengthy regulatory delay that has kept the company’s AI features out of one of its most important markets. The iPhone maker is planning to launch Apple Intelligence in the region in December as part of an upcoming iOS 27.3 update, according to people with knowledge of the matter. The debut will include the AI features first rolled out in the US two years ago on the iPhone, iPad and Mac. The launch will exclude the new Siri AI assistant and other features announced this year, said the people, who asked not to be identified because the plans are private. (Bloomberg)

Our view has been that this deployment by Apple (AAPL) into the China market would only be a matter of time, but it’s also been a long time coming. At one point, the company believed the release would happen in May 2025. Unlike in other countries, the platform has guardrails developed with China’s Alibaba Group Holding Ltd., including a filter that allows the government to approve ongoing updates to the AI models. Yeah…

Our view is this is a nice to have for Apple, but the real catalyst for the shares is the reception of the iPhone Duo. Orders for Apple’s first foldable smartphone kick off tomorrow, October 16, with devices slated to land on shelves October 13. We expect a very upbeat press release in the next few days, indicating how Apple’s initial stock of Duo product is sold out. We’ll be as interested in product reviews that should start appearing in advance of Apple’s September-quarter earnings report on November 2.

7. Economic data today per TipRanks: Initial and Continuing Jobless Claims (Weekly), Producer Price Index (September), Retail Sales (September), Empire State Manufacturing Index (October), Philly Fed Index (October), Business Inventories (August), EIA Natural Gas and Oil Inventories (Weekly).

8. Companies reporting today per TipRanks: AM – BNY Mellon (BNY), Charles Schwab (SCHW), Ericsson (ERIC), First Horizon (FHB), Manpower (MAN), PNC (PNC), U.S. Bancorp (USB). PM – Alcoa (AA), Interactive Brokers (IBKR), JB Hunt (JBHT).

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At the time of publication, TheStreet Pro Portfolio was long AAPL, AMAT, and COST.