Market Update: September 15th, 2025

Financial Markets

Equities ended the week on a strong note as tame inflation data, particularly on the producer side, along with weakening labor market indicators, reinforced expectations for a Federal Reserve rate cut this week. The Nasdaq Composite led with a 2.03% gain, while the S&P 500 climbed 1.59% and the Dow Jones Industrial Average rose 0.95%, reflecting broad-based optimism that a more accommodative monetary policy stance could support further gains in risk assets.

Market News

August CPI. Consumer inflation picked up in the month of August, reminding markets that tariff impacts have yet to be fully realized. Headline CPI rose 2.9% year over year, the fastest pace since January, while core CPI climbed 3.1%. On a monthly basis, headline prices climbed 0.4% and core prices 0.3%.

By category, groceries rose 2.7% YoY, with standout increases in roasted coffee prices (+21.7%), uncooked beef steaks (+16.6%), eggs (+10.9%), and apples (+9.6%). Dining out costs were up 3.9%, while energy rose a slight 0.2% from August 2024, reflecting lower oil prices offset by higher electricity costs.

In the auto sector, new vehicles prices rose 0.7%, whereas used vehicles jumped 6%, highlighting a unique dynamic of stronger pricing power in used vehicle markets. Shelter inflation moderated slightly to 3.6% YoY, consistent with a cooling housing market. Despite the uptick in prices, softening labor market data have kept expectations for a potential Federal Reserve rate cut this week firm, bolstering market sentiment.

Source: Bureau of Labor Statistics

August PPI

Wholesale inflation came in softer than expected in August, with headline producer prices rising 2.6% year over year, down from 3.1% in July. Core PPI, which excludes food, energy, and trade costs, advanced 2.8% YoY. On a monthly basis, overall prices actually fell 0.1%, while core prices rose 0.3%, indicating that much of the month’s deflation came from volatile categories (food, energy, trade costs) that the core reading strips out.

Much of the deflation came from two categories, as energy prices fell 0.4% and trade services costs declined 1.7% month over month. On the other hand, other categories continued to experience upward pressure: goods excluding food and energy rose 0.3%, transportation and warehousing services climbed 0.9%, and other services increased 0.3% in August.

The softer-than-expected headline figure is encouraging, as wholesale prices often flow through to consumers. Still, stickier inflation in several categories suggests that underlying price pressures are not yet fully contained.

Source: Bureau of Labor Statistics

Downward Revisions to Job Gains

Annual revisions to nonfarm payroll data through March 2025 revealed employment was 911,000 jobs fewer than initially reported over the past year and a half. Recent data reinforce that softer trend, with payroll growth averaging just 29,000 jobs per month in June, July, and August, including a decline in June. Together, the revisions and weak summer hiring underscore a clear loss of momentum in the labor market, raising heightened concerns about the economy’s underlying strength.

Source: FRED

Initial Claims

Jobless claims rose to 263,000 for the week ending September 6th, the highest level since October 2021, while the four-week moving average ticked up to 240,500, an increase of 9,750 from the prior week’s moving average. The pickup in claims, combined with downward revisions to prior payroll data, adds to evidence of a cooling labor market and will likely factor into the Federal Reserve’s policy discussions this week.

Source: Department of Labor

Consumer Sentiment

The University of Michigan’s Index of Consumer Sentiment slipped 4.8% in September and was down 21% from a year ago, continuing to reflect a more cautious outlook among households. The pullback was most pronounced among lower- and middle-income consumers, though overall sentiment remains above the lows seen in April and May 2025, immediately following the announcement of reciprocal tariffs.

Expectations for higher unemployment over the next year weighed on confidence, while year-ahead inflation expectations held steady at 4.8%, unchanged from August. The data highlights the continued weakness in sentiment indicators, coinciding with signs of softening in the labor market.

Source: The University of Michigan

Summary

Economic data this week painted a mixed picture, with inflation showing pockets of strength but remaining relatively tame. August CPI rose 2.9% YoY, while PPI came in softer than expected, reflecting easing wholesale pressures despite stickier costs in some categories. Labor market indicators showed slowing momentum, including downward revisions to payrolls and elevated initial jobless claims, while consumer sentiment remained weak. Despite soft employment and sentiment data, stocks advanced last week, largely driven by expectations for a Federal Reserve rate cut in the coming days.

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Thank you,

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA

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