Oil's renewed rise has increased inflation concerns in stock and bond markets. Technology stocks fell yesterday along with gold and silver; today's U.S. CPI release will be an important test for investors after the sell-off.

This time, the risk to energy transportation is not limited to Hormuz. Developments in Yemen have also put passage through the Red Sea in focus, so the effect of oil on corporate costs and consumer spending needs to be reassessed.

Key takeaways

  • When stocks fall while bonds also lose value, investors face an environment in which both sides can hurt at once. Adding more assets does not by itself provide protection if all of them face the same interest-rate pressure.
  • An increase in energy prices and inflation spreading across all categories are different situations. In today's data, looking at the path of prices excluding food and energy alongside the headline figure will give a better sense of the problem facing the Fed.
  • Long-term growth expectations for a sector can remain intact without stopping its stocks from falling in the short term. When looking for a recovery, it matters not only whether new-product news arrives but also whether lost price levels are reclaimed.

What happened?

  • According to the U.S. Bureau of Labor Statistics' September 10 release, U.S. August PPI rose 0.4% month over month and 5.4% year over year. Energy accounted for most of the rise in goods prices. The index excluding food, energy and trade services rose 0.3% month over month; producer costs should not be assessed from the headline figure alone.
  • According to Reuters, Brent rose 6.34% yesterday to close at $107.63. AP reported, citing Houthi and Yemeni officials, that the Houthis had taken the city of Mokha. This development near the Bab el-Mandeb Strait adds another shipping risk to the Hormuz problem; military statements in the region have not yet established a lasting transit arrangement.
  • The European Central Bank raised all three of its key interest rates by 25 basis points, or 0.25 percentage point, yesterday. The Central Bank of the Republic of Turkey kept its policy rate at 37% and drew attention to the upside risk that high energy prices pose to inflation. The common point between the two decisions is that energy-driven price pressure is narrowing room for monetary policy.
  • Market commentator Tunç Şatıroğlu (@tuncsatiroglu) thinks a lower-than-expected consumer-inflation reading and a decline in bond yields could support a recovery. There is no reversal to support that expectation yet: chip companies fell more sharply than the broad U.S. market yesterday.
  • In an 11 September CNBC report, Chase Travel executive Jason Wynn says customers are not giving up travel even as prices rise. People are looking for discounts, but demand continues. This example does not represent all consumption, but it is a reminder that expensive energy does not cause spending to contract at the same pace in every category.

What changed since yesterday?

  • Chip stocks had been holding up better than the broader market in the previous note. In the latest close, that divergence reversed; whether the sector can lead again in today's recovery attempt will matter.

Market levels

Oil and U.S. stocks

  • After yesterday's close at $107.63, Brent rose to around $108.59 this morning in an AP report. $100 below is a candidate for psychological support and the first threshold; a return to the $95-$96 zone I have been watching would be more meaningful as a sign that energy-driven pressure is easing. Today's price is far from that relief.
  • SPY ($SPY), which tracks the S&P 500, closed down 0.60% at $757.83 yesterday. It is now below the $760 watched by market commentator Bora Özkent (@boraozkent). Yesterday's low of $756.64 is a nearby support candidate; reclaiming $760 is the first threshold, while $770 is resistance above.
  • The QQQ ($QQQ), which tracks the Nasdaq 100, fell 1.06% to $708.69 and closed below the $712 level I have been watching. It needs to clear $712 first, then the $720 resistance zone. Below, a break of yesterday's support area around $706.86 would increase the risk of a new low.
  • The semiconductor-company ETF SMH ($SMH) fell 2.44% to $560.28. Re-establishing itself above $562-$563 would be the first recovery step; $572 remains resistance and $545 support.
  • IGV, which tracks software companies, remained weak with a close at $101.20. Preserving yesterday's $100.59 as support matters for stopping the decline. The short-term picture could improve above $102.72; the higher resistances at $106 and $108 remain in place.

Bonds, precious metals and crypto

  • TLT, which tracks U.S. Treasuries with more than 20 years to maturity, fell 1.16% to close at $80.78. When bond prices fall, yields rise. With $80.67 as a nearby support candidate, reclaiming the $81.36 resistance area will be the first check for whether selling in this fund is easing.
  • The gold ETF GLD ($GLD) fell 1.73% to $396.36. Yesterday's low around $395.45 is a support candidate below, while $401.15 is the first resistance above. Unless that price is cleared, a relief rally may remain weak. The distance from the $408 level I had been watching has widened.
  • The silver ETF SLV ($SLV) fell 5.30% to $57.50. The close is near the $57.38 support candidate. Clearing the $58.73 resistance zone could be the first sign of a recovery; the $60.16 floor from the previous day is now an area that needs to be reclaimed above.
  • Bitcoin is around $77,321 this morning, close to the $76,685 support zone from the previous analysis; a break below it would increase the risk. A four-hour close above the $81,853-$83,220 resistance zone, followed by buyers continuing into the next candle, is required before the rise can be considered confirmed.
  • Ethereum is around $2,469, below the $2,530-$2,576 barrier. A recovery could strengthen if the resistance is cleared while the $2,380 support holds. If support is lost, the conditions for the same optimistic scenario also deteriorate.

Red flags

  • Oil staying at a high level does not mean that it will create new inflation at the same pace every month. But a renewed rise, combined with the delayed pass-through of earlier increases into areas such as transport, could prolong cost pressure.
  • An inflation figure below expectations could trigger initial buying; if bond yields keep rising, however, it will be hard for that move to continue. The first price reaction should not be confused with the end-of-day result.

Calendar

  • September 11, 3:30 p.m. TRT: August U.S. consumer inflation (CPI). In addition to the headline increase, core components and services prices will be watched.
  • September 15-16: Fed rate meeting (FOMC) and economic projections. The inflation assessment will matter as much as the rate decision in changing expectations for the period ahead.

My analysis

I am putting the effect of borrowing costs on technology stocks at the center. With software already weak and companies with strong growth expectations also falling, we need to look at borrowing costs before company news. Higher rates reduce the present value of profits expected in the future; a good operating story does not remove that calculation.

Today I will first watch the details of inflation, then bond prices and the close in technology stocks. If these assets also respond positively to the data, the recovery will have firmer support. If oil continues to rise and yesterday's lows are broken again, it will be too early to conclude that the decline is over.

Sources

This is not investment advice; it is a research and monitoring note.