U.S. oil prices surged past $100 per barrel this week, driven by escalating conflicts in the Middle East and a breakdown in the Russia-Ukraine energy ceasefire. The Houthis launched multiple attacks on Saudi Arabia, including a strike on Saudi Aramco, while Iran intensified its assaults on ships in the Strait of Hormuz, marking the highest number of attacks since the conflict began.
Inflation in the U.S. exceeded expectations, with headline CPI rising to 3.7% annually from 3.4%, and core CPI increasing to 2.6% from 2.4%. Despite the higher-than-expected inflation, the Federal Reserve signaled a pause in October, with hike odds remaining below 20%. Fed Chair Kevin Warsh's comments reinforced this stance.
The artificial intelligence (AI) sector faced significant pressure this week. A top Chinese memory chip producer announced progress in developing cutting-edge chips, posing a potential challenge to industry leaders like SK Hynix and Samsung. Additionally, AVGO's CEO criticized the AI investment frenzy, stating that many investors lack understanding of what they are investing in, likening it to gambling. Concerns also arose over whether some AI infrastructure companies can generate sufficient revenue to cover their costs.
Amid these developments, 10-year Treasury yields declined by about 15 basis points to 5.1%, likely due to safe-haven demand, while the Nasdaq-100® dropped 5%. Next week, key events to watch include earnings reports from META and TSLA on Wednesday, jobless claims on Thursday, and preliminary October PMIs for S&P Manufacturing and Services on Friday.