Stocks finished lower last week as investors digested increasing stress in credit markets and the AI trade, firmer-than-expected inflation, and an economy that remains resilient despite higher oil and rates. Monday was relatively quiet, with U.S. bond markets closed for Columbus Day. On Tuesday, bank and health care earnings left stocks little changed, as existing home sales modestly beat expectations and small business sentiment declined. The tone shifted meaningfully on Wednesday, when core CPI rose 0.33%, driven by firmer shelter costs, pushing both stocks and bonds lower and raising the odds of an October hike. Thursday brought a rotation away from AI toward defensive pockets of the market, as higher-than-expected producer prices (PPI) reinforced inflation concerns despite soft core retail sales, mixed regional manufacturing surveys, and steady jobless claims. Stocks then fell again on Friday, despite strong industrial production. Speaking at the IMF–World Bank meetings, Fed Chair Kevin Warsh gave no hint on the Fed's October decision, but his remarks led markets to price in an October pause and a December hike.
Korean equities experienced a truly historic week, with the KOSPI falling 14.5%, its steepest weekly decline since October 2008, despite a 2.1% rebound on Friday. The selloff capped a seven-session slide that erased more than 20% of the index's value, driven by renewed doubts over AI investment returns, competitive pressure from Chinese memory makers, and a hotter-than-expected U.S. CPI print that triggered a circuit breaker on Thursday. The logic is straightforward: elevated oil prices feed inflation, inflation pushes yields higher, and higher yields squeeze the economics of new AI infrastructure, raising the risk of a slowdown in the build-out. With Samsung and SK hynix accounting for more than half of the index, Korea has become a concentrated proxy for AI spending, much as the U.S. economy has become meaningfully reliant on that same build-out. Markets felt the effects more broadly with the emerging markets index (where Korea makes up about 21.4% of the index) declining by 4.7% for the week.
1. Existing Home Sales
National Association of REALTORS (NAR), Existing-Home Sales Summary, retrieved from NAR; https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales
2. NFIB Small Business Optimism Survey
The National Federation of Independent Business (NFIB) Research Foundation, Small Business Optimism Index, retrieved from NFIB, https://www.nfib.com/news/monthly_report/sbet/
3. Consumer Price Index (CPI)
U.S. Bureau of Labor Statistics, Consumer Price Index Summary, retrieved from U.S. Bureau of Labor Statistics; https://www.bls.gov/news.release/cpi.nr0.htm
4. Producer Price Index (PPI)
U.S. Bureau of Labor Statistics, Producer Price Index News Release Summary, retrieved from U.S. Bureau of Labor Statistics; https://www.bls.gov/news.release/ppi.nr0.htm
5. Retail Sales
United States Census Bureau, Advance Monthly Sales for Retail and Food Services, retrieved from U.S. Census, https://www.census.gov/retail/sales.html
6. Philly Manufacturing Survey
The Federal Reserve Bank of Philadelphia, Manufacturing Business Outlook Survey, retrieved from Philadelphia Fed, https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis/manufacturing-business-outlook-survey
7. Empire State Manufacturing Survey
The Federal Reserve Bank of New York, Empire State Manufacturing Survey, retrieved from New York Fed, https://www.newyorkfed.org/survey/empire/empiresurvey_overview
8. Jobless Claims
U.S. Department of Labor, Unemployment Insurance Weekly Claims, retrieved from U.S. Department of Labor; https://www.dol.gov/ui/data.pdf
9. Industrial Production
Board of Governors of the Federal Reserve System, Industrial Production and Capacity Utilization – G.17, retrieved from The Federal Reserve, https://www.federalreserve.gov/releases/g17/current/
Market Data
Morningstar Direct using Morningstar Indices