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Weekly Update 10/16/2026: Earnings Season Begins

Insights
  • Visa secures approval in China
  • Big banks report mixed results
  • JNJ's MedTech division struggles but pharma excels
  • Travelers reports solid results

Inflation readings

The Bureau of Labor Statistics (BLS) reported on Tuesday that U.S. consumer prices advanced last month at the fastest pace in five months, registering a 0.6% gain from a month earlier in the consumer price index (CPI). When the more volatile food and energy categories are excluded, the so-called core rate was up a more modest 0.3%. On a year-over-year basis, the headline figure was up 3.7%, exceeding the 3.6% median view in a Bloomberg survey of economists. The core rate was up 2.6%, also surpassing the consensus view of 2.5%.

Gasoline prices were the main culprit for pushing prices higher. They rose 9.1% in September versus August—the most since March when U.S. and Israel forces began engaging militarily with Iran. Medical care services prices rose 0.3% and owners’ equivalent rent, the largest component of CPI, advanced 0.3%. Core goods prices rose by the most since January 2025 driven by increases in prices for used cars and apparel. Computer software and accessories rose a record 28.4% from a year earlier, reflecting the demand for materials to support the data center buildout. Computers, peripherals and smart home assistants rose a record 9.7%.

With midterm elections less than a month away and affordability a main concern for voters, the last consumer price data investors will receive before November 3 is not promising. At the start of the year, inflation had settled back toward its lowest levels since early 2021 and achieving the Fed’s preferred 2.0% target level was within reach. Then the war sent energy prices surging. There is evidence that rising fuel prices are now seeping into other areas. For example, higher diesel prices affect the cost of transportation, which bumps up the cost of food rather quickly and durable goods like furniture and televisions over time. Based upon household surveys, many families are increasingly frustrated with the cost of living outpacing wage growth. A separate report on Wednesday showed that average hourly earnings, adjusted for inflation, fell in September from a year earlier for a sixth consecutive month. 

Producer price data released on Thursday was not much better and could arguably be viewed as worse since wholesale price moves precede the price at the finished goods level. The BLS reported that the producer price index advanced 1.3% in September from August and 6.3% from a year earlier. Excluding food and energy, the metric was up 0.7% last month and 5% from a year ago. Both figures exceeded all estimates in a Bloomberg survey of economists. Similar to the CPI, energy was a main cause for the rise with those prices up 10.8% in September, while transportation and warehousing prices advanced 3.4%, the most since April. Wholesale and retail trade services margins rose a solid 1.4%, suggesting that companies are passing along tariff-related costs to customers after absorbing them for most of last year. Not all categories rose as various healthcare measures were relatively soft. But there were enough spikes—like the 5% jump in airfares—to show that higher costs are showing up in more areas than at the start of the year. 

This has boosted the odds of a Fed rate hike at its next meeting on October 28. Last Friday, before the CPI data was released, the fed funds futures rate was showing a 17% chance of a rate hike. As of Thursday of this week, those odds have risen to about 30%. The Bloomberg economics group computed that on a 12-month basis, of the more than 170 components of CPI it tracks, 48% of them are running above a 3% annual rate, down from 51% in August. This is a metric that Fed Chair Kevin Warsh said he tracked during his August Jackson Hole speech, so it is worth analyzing. That percentage remains above its historical average of 32% but below elevated post-pandemic levels. Thus, a rate hike is not a done deal, especially given the date of the midterms is less than a week following the Federal Open Market Committee meeting. The Fed has historically tried to remain apolitical and steer clear of actions that may influence civic events.

The next few weeks will be filled with events starting with earnings season that begins this week. The heaviest reporting will take place during the third and fourth weeks of the month, just when the Fed meeting is scheduled to conclude. The first week in November has the midterm elections where all 435 House seats are at risk and one third of the Senate, with a real possibility of a change of control in the majority political party. While there have been a lot of volatile events so far this year, it would not be a surprise to see the next month of trading topping those levels. Stay tuned! 

Company Events

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