August PPI up 0.4%, 5.4% Annualized; Dow Closes Below 50-Day Moving Average Over Interest Rate, Oil Price Tops $100; Panic in the Air

Well, there it is.

The Dow Jones industrial Average closed decisively below its 50-day moving average for the first time since early April, when the U.S.-Iran war was just beginning to cool down. Now that military conditions appear to be getting heated once more, will this spawn a selloff in stocks as was the case in early March when kinetic acton was at its height?

Maybe. It's clearly too early to tell from a chartist perspective, but, then again, could the Iranians (and Houthis) be playing a little politics? Would they like to see President Trump lose power in the midterms and possibly face impeachment proceedings in the House? There's little doubt that Iran's leaders would relish that possibility. Then again, it could be merely coincidence, though those with suspicious minds may be thinking deeper than merely the midterms. A master plan may be at work for those with their tin foil hats firmly secured.

Fail in the midterms. Let the economy - and the dollar - crash, send treasury yields on long-dated maturities higher, blame the Democrats, usher in emergency rate cuts in Q2 2027, inflate, inflate, inflate. Simple. Done deal. Actually doesn't sound so far-fetched.

Whether the Iran situation or the midterms or the interest rate cycle plays out in exactly this manner may not actually have to happen for a crisis to develop. There may already exist a financial crisis that the elitist government isn't keen on revealing to the unwashed masses. Treasury Secretary Bessent has already intervened in the Japan carry trade. Oil is at three-month highs. Gas prices are killing everybody. High diesel prices are the hidden inflation driver that will eventually trigger another round of price inflation. Meanwhile, the Fed has been quietly humping the money supply higher.

See the chart? That move from July, 2025 to July, 2026 is a 5.14% move. That's higher than inflation, whatever CPI number is released on Friday. The Federal Reserve is doing more to debase the dollar and erode purchasing power than all the IIRC generals in Iran combined. Keep pumping the money supply, inflation will follow like night follows day.

"Inflation is always and everywhere a monetary phenomenon." -- Milton Freidman

Approaching the opening bell, everybody got a little taste of what the CPI is likely to show tomorrow as the BLS calculated August PPI at 5.4% on an annualized basis.

The Producer Price Index for final demand moved up 0.4 percent in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.1 percent in July and decreased 0.1 percent in June. (See table A.) On an unadjusted basis, the index for final demand increased 5.4 percent for the 12 months ended in August.

In August, the index for final demand goods advanced 1.1 percent, and prices for final demand services increased 0.1 percent.

The index for final demand less foods, energy, and trade services rose 0.3 percent in August after moving up 0.4 percent in July. For the 12 months ended in August, prices for final demand less foods, energy, and trade services advanced 4.7 percent.

That announcement sent shockwaves through the futures complex. Dow futures fell to -156, NASDAQ futures dove more than 350 points and S&P futures were rocked 35 points lower. As usual, gold and silver were punished as well. The lone standout amid the fraying in the markets was crude oil. WTI crude futures for October shot over $100/barrel as hostilities in the Middle East continued to escalate.

The major indices have spent the past three sessions in the red, starting with the August Non-farm Payroll report on Friday that sent rate hike expectations through the roof. With the PPI figure released today suggesting that price inflation isn't about to roll over and die, what will CPI look like tomorrow, and what will investors do?

Three straight down days on the majors doesn’t make a trend. That happens all the time. However, all three majors dropping between two and three percent over the last month might be considered trend-worthy. It's at least something to consider. For now, it's a minor pullback from arguably overvalued levels. Should Friday's CPI figure be worse than expected (headline upwards of 3.4%; core, 2.4%), market response is likely to be largely negative.

If stocks are entering a downtrend phase, there isn't much in the way of catalysts to stem the tide. There's the FOMC meeting next week. If the Fed decides they've had enough of inflation and raises the federal funds rate, it's doomsday. After that, the 2026 fiscal year closes for the federal government on September 30 and roughly two weeks after that third quarter earnings begin to roll. That's a month full of possible pitfalls, suggesting cautious market movement.

Friday is also the 25th anniversary of 9-11, the Twin Towers disaster. It is one of the nation's most terrifying and revered dates and one Wall Street veterans will never forget. Sentiment over the event is not likely to play a part in whatever happens in markets on the last trading session of the week.

For now, it appears that te Dow's breakdown below the 50-day moving average was indeed a strong signal. Fears of a rate hike by the Fed last week have accelerated and panic is in the air.

At the Close, Wednesday, September 9, 2026:
Dow: 52,380.66, -405.41 (-0.77%)
NASDAQ: 26,253.34, -168.07 (-0.64%)
S&P 500: 7,636.36, -37.16 (-0.48%)
NYSE Composite: 24,311.15, -161.91 (-0.66%)