Hot US CPI Print Drives Selloff in Equities and Crypto

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In Today's Note

• A hotter-than-expected US CPI print sent the S&P 500 down 1.11% and the Nasdaq-100 down 2.02% before Treasuries rallied, while BTC fell 2.5% to $81.3K and ETH dropped 5.3% to $2,371 overnight.
• Fed funds futures now price a 29% chance of an October hike after briefly reaching 44%, while Chicago Fed President Goolsbee called the data “discouraging” for the 2% inflation target.

Market Snapshot: Overnight Moves

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Macro & Markets

• A hotter-than-expected CPI report yesterday drove a dramatic selloff across risky assets, from the S&P 500 to Russell 2000 to crypto assets. 
• Consumer prices in the US advanced in September at the fastest pace in five months as the headline consumer price index rose 0.6% from a month earlier versus expectations of 0.5%. Core CPI rose 0.3% month over month, also exceeding expectations of 0.2%. 
• That meant year-over-year, headline CPI had advanced 3.7% in September, above the expected 3.6% and core CPI was up 2.6% from a year ago, against the 2.4% level reached in August. 

• More than half of the increase in monthly headline prices was driven by higher gasoline costs, which climbed 9.1% in September from the prior month — the most since the outbreak of the US-Iran war sent fuel prices surging higher in March. The overall energy index rose 5.2% following a 2.1% increase in August. 
• However, there were signs of inflation beyond just energy prices. Broader services prices excluding energy and rents rose for a second month, while core goods prices rose by the most since January 2025, reflecting demand for used cars and apparel, and a record jump in the price of toys.
• The report also highlighted the ongoing inflationary pressures from the data center buildout that many Fed officials have recently spoken of: Computer software and accessories prices rose a record 28.4% from a year earlier, while prices of computers, peripherals and smart home assistants also rose a record 9.7%.

• Despite the increase in prices, the report was not enough to entirely switch market expectations for a rate hike in the FOMC’s meeting later this month. Following the report, Fed funds futures priced in a 44% chance of a quarter point hike, up from about 20% prior to the report, but that has since fallen down to 29%.

• Risk assets were the most affected by the report. The S&P 500 closed the day down by 1.11%, for its largest decline since July, while the tech-heavy Nasdaq-100 plunged 2.02%. The Russell 2000 Index entered a technical correction, as the gauge for small cap stocks has now fallen more than 10% from its most recent peak, marking its first technical correction since March.
• The selloff in chipmakers extended further, bringing the Philadelphia Semiconductor sector index down 4.30% just in trading yesterday, and 12% over the past six days. 
• Meanwhile BTC fell more than 4% from $84K to just above $80K, dragging down the rest of the crypto market with it, with ETH down more than 5% over the last 24 hours. 

• The retreat away from risk drove investors back towards US Treasuries by the end of the day. The 2-year yield opened at 4.79% on Wednesday, briefly rose to 4.95% in the immediate aftermath of the report, before plunging down to 4.7% intraday. 
• Similarly, the 10-year yield opened the day at 5.2% before briefly rising to 5.33% after the report, only to fall more than 20bps down below 5.1%. 

• Speaking after the release of the BLS’s CPI report, Federal Reserve Bank of Chicago President Austan Goolsbee said in an interview with Yahoo Finance that the data was “discouraging” for progress on the 2% inflation target. 
• When it comes to the price pressure data, "I'm concerned, related to not just the overall number, but if you break ​out the components, services inflation shows little sign of improvement”, Goolsbee said.
• He pointed to price pressures building up in areas outside those directly impacted by tariffs and energy for example — "This month's reading is over 5% for services inflation ​and you can't really attribute services inflation ​to tariffs, to oil prices, or things like that".
• If inflation pressures remain elevated, "there's ⁠not ambiguity about what, how the central bank has to deal with that. You must prevent the buildup of overheating, because if you get overheating buildup on the ⁠demand side, that tends to be very persistent and hard to get rid of”.

This Week's Calendar

Charts of the Day

Figure 1. Block Scholes BTC Risk-Appetite Index (white, left-hand axis) and BTC spot price (orange, right-hand axis).

Figure 2. Block Scholes ETH Risk-Appetite Index (white, left-hand axis) and ETH spot price (purple, right-hand axis).

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Figure 3. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes.

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Figure 4. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes.

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Figure 5. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes.

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Figure 6. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes.

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