Dow Jones Industrial Average rallies all session as long yields back off

• DJIA rallied on Friday as long yields back off, roughly 500 points to near 52,600.
• The 10-year Treasury yield ran at 5.00% on the inflation print and then turned.
• Core CPI 0.3% on the month, a tenth above consensus, core goods at 0.1%.

The Dow Jones Industrial Average trades just beneath 52,600, roughly 510 points higher, after four sessions of losses. The inflation print was worth about 100 points at 12:30 GMT, and the rest of the advance arrived in the afternoon once the long end of the Treasury curve turned. Crude Oil is lower on the day, and American diesel set a record at the pump this morning. The barrel is not what changed.

The long end looked at 5% and backed away

The 10-year Treasury yield rose toward 5.00% on the data and then reversed, and it trades near 4.90%. The 30-year is lower on the day after Thursday took it to 5.37%, the highest since 2007. The 2-year is higher on the day and has given back most of an 11 basis point jump. That is the part of the curve that prices next Wednesday, and it is the part that did not back off.

Four sessions of selling ran the same mechanism in reverse. The 10-year set its highest level since October 2023 this week, the 30-year its highest since 2007, and chip names led Thursday's decline on their exposure to long-dated credit costs. The front end has bought the hike. The long end has bought what the hike is supposed to do to growth.

The headline was gasoline and the core was jet fuel

The Consumer Price Index (CPI) rose 0.4% in August and 3.4% YoY, both in line with consensus. The core measure rose 0.3% on the month against 0.2% expected. The annual core rate eased to 2.4% from 2.5%. Gasoline rose 3.9% and did more than a third of the monthly increase on its own, and the energy index is up 16.3% over the year.

The beat did not come from tariffs. Core goods rose 0.1% on the month and 0.7% on the year. What moved were the services that burn fuel: airline fares up 2.7% in the month and 23.4% over the year, transportation services up 0.5%, and shelter reaccelerating to 0.3% from 0.1%. Monthly core has run 0.0% in June, 0.2% in July and 0.3% in August. The core rate is being lifted by the price of the thing it excludes.

Crude Oil eased and diesel set a record

Crude Oil is lower on the day and both benchmarks hold gains near 20% over the past month. American diesel passed $6.00 a gallon for the first time on Friday, at $6.05 against $5.32 a month ago. That is a price 29 of these 30 members pay rather than charge, and it went up today. Chevron (CVX) is the one member on the other side of it, and energy is the smallest sector weight in the average at 2.4%.

The consumer that pays for it disagreed

The University of Michigan's preliminary September survey put sentiment at 47.8, down from 51.7 and beneath a consensus of 51. The expectations component fell to 45.8 from 51.5. The survey has run since 1952 and its record low is four months old. Year-ahead inflation expectations jumped to 4.6% from 4.0%, and the five-year measure rose to 3.4% from 3.3%. Those last two figures are the reason a quarter point is on the table at all.

The curve is not pricing one hike

Futures put a move to 3.75-4.00% next Wednesday at 86.71%. By the December 9 meeting, 4.00-4.25% carries 93.96%. By March 17 the market puts 89.29% on 4.25-4.50%, and a fourth increase leads the pricing by the July 2027 meeting. The question on the screen is not whether the Federal Reserve hikes but how many times it has to.

The committee's own June projections put the funds rate at 3.8% for the end of this year, 3.6% for next year and 3.1% in the longer run. The market sits close to a point above that for 2027. A fresh set of projections arrives with the decision on Wednesday, so the dots and the curve get reconciled in public, and only one of them has to move.

The week hands the decision one number

August retail sales land Wednesday at 12:30 GMT after a 0.6% fall, with the control group last at -0.4%. The decision follows at 18:00 GMT alongside the projections, and the press conference at 18:30 GMT. The print reaches the committee five and a half hours before the vote it is meant to inform. Thursday carries housing starts, building permits, jobless claims last at 206K and the Philadelphia Fed survey last at 47.4, with industrial production on Friday.

Levels and bias

Resistance: The 50-day Exponential Moving Average (EMA) near 52,750 is the first hurdle, and the session high stopped short of it. Above that sit 53,000 and the 53,250 area, then the 53,500 shelf and the 53,800 band that capped the August rallies. The early-August peak just short of 54,750 is roughly 4% overhead.

Support: The session low in the 52,100 area is the first floor, and Thursday's close sits just beneath it. Under that lie the 52,000 handle, then 51,500 and the June low near 51,300. The 200-day EMA near 50,250 is not in play.

Bias: Bearish while the 50-day EMA near 52,750 caps, with the 52,100 area the first objective and the 52,000 handle behind it. The daily Stochastic Relative Strength Index (Stoch RSI) near 39 has not been oversold since July, so four sessions of selling exhausted nothing, and the five-minute reading near 75 says this bounce is late rather than early. A daily close above 53,000 voids the case and puts 53,250 back in range.

Dow Jones daily chart