Equities Slide on Higher Yields, Energy Costs and Fed Uncertainty 

Despite strong returns last Friday, it was not enough to offset losses accumulated earlier in the week. Each of the benchmark indexes closed the holiday-shortened week in the red as investors tried to reconcile rising energy prices, increasing inflation, climbing Treasury yields and the increasing likelihood of an interest rate hike by the Federal Reserve. Among the market sectors, only Energy and Communication Services saw gains. Health Care stocks fell more than 3.5%. Ten-year Treasury yields closed near 5.0%, reaching their highest levels in nearly three years. Crude oil prices surged to levels not seen in several months amid escalating tensions in the Middle East. 

Consumer Prices Rise 0.4% in August, Led by Energy and Shelter 

The Consumer Price Index (CPI) increased 0.4% in August after rising 0.1% in July. Over the last 12 months, the CPI increased 3.4%. Prices for gasoline rose 3.9% in August, accounting for over one-third of the monthly CPI increase. Overall energy prices rose 2.1% last month. Shelter prices advanced 0.3% in August after rising 0.1% in July. Food prices increased 0.1%. The CPI less food and energy rose 0.3% in August after increasing 0.2% in July. Prices less food and energy rose 2.4% over the year, following a 2.5% increase over the 12 months ended in July. 

Eye on the Week Ahead 

The Federal Open Market Committee will meet for the first time since July. Since that time, inflation has steadied somewhat, while job gains rose to unexpected levels. The Fed may take these signs as an indication that monetary policy may be ready for tightening, which may prompt a rate increase.