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Perspective: Morning Commentary for September 11

By: Mike Castle, Market Intelligence - Fertilizer Analyst

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September 11 – Before turning to today’s market developments, we want to acknowledge that today marks the 25th anniversary of the September 11th terrorist attacks. We remember the nearly 3,000 lives lost, honor the first responders and countless others affected, and reflect on the lasting impact that day had on the United States and the world.

Headline CPI held steady at 3.4% in August, matching analyst estimates and tying July for the lowest print since March. The month-on-month gain of 0.4% was the hottest since May but also matched expectations. Excluding the more volatile energy and food prices, core CPI did see a slightly hotter than expected monthly gain, rising 0.3% in August, above the average estimate of 0.2% and marking the fastest uptick since April. However, the year-on-year rise of 2.4% matched expectations and represents the lowest print for the metric since March 2021, an encouraging sign.

This is a significantly better result than yesterday’s producer level inflation data, which should ease some of the most hawkish concerns and allow for a near-term sigh of relief on Wall Street. I would encourage caution before assuming that the pressures for consumer level inflation are behind us, however. Obviously, the rise in energy prices is having a notable impact, with the 3.9% month-on-month rise in gasoline prices accounting for over one-third of the monthly increase in the headline number, but I want to shift focus to the pressures being seen at the core level. As a reminder, yesterday’s release showed core PPI rising 4.6% year-over-year, meaning the spread between core PPI and CPI now sits at 2.2%, the highest level seen since June 2023. As the graphic below shows, this historically translates to an eventual pass-through to the consumer level as producers attempt to recover margin. On the way down from the 2022 spike, core CPI ended up with a significantly longer tail than PPI, resulting in 22 consecutive months of core consumer level inflation holding above the producer level. Obviously, there’s no guarantee that we will see a repeat of this phenomenon, but it’s important to acknowledge the risk, especially given the pressure coming from record high diesel prices that are materially increasing transportation costs of effectively all consumer goods. Eventually, there will be an attempt to pass these costs along.

The calmer CPI data has stock futures pointing to a stronger open as fears of a blowout print and more materially hawkish shift ease, coinciding with a nearly 9% drop in the VIX, now hovering around 16.25 after pushing to a month-plus high above 18 yesterday. The dollar has also reversed course from overnight gains to now hang slightly in the red following the release, trading just above 99 at the time of writing. Long-term treasury yields are also easing notably from their fresh multi-year highs in response, a welcome development for the U.S. administration. 10-year yields have fallen back to 4.92% after nearly breaking the psychologically important 5% level earlier this morning, and 30-year yields are back down to 5.32% after posting a fresh 19-year high at 5.42%. 2-year yields remain elevated as expectations grow for a hike at next week's Fed meeting, though they are also off their morning highs of 4.657% to now hover around 4.59% at the time of writing. Crude oil prices are clawing back much of yesterday's sharp gains, with nearby WTI down 4.75% to trade near $99 and nearby Brent down 3.3% to trade near $104. The ags are mostly lower to start the day, likely a function of some position squaring ahead of today’s highly anticipated September WASDE, with significant attention given the recent surge in grain and oilseed prices and hefty managed money length.

The Houthi advance in Yemen continues, seizing critical coastal areas that raise the threat to shipping through the Bab al-Mandab Strait. The Saudi-backed Yemeni government has confirmed a “strategic retreat” from the coastal city of Mocha, while the Associated Press is reporting the capture of Mayun, a small island located within the Strait itself. This is a notable change in momentum in this conflict, giving the Houthis significant strategic advantage for targeting vessel movement via this alternate route. The Saudis have responded with an intensifying air campaign, including targeting the airport at Mocha, but it appears to have done little to slow the ground advance thus far. Satellite imagery indicates a significant fire along the route of Saudi Arabia’s East–West oil pipeline toward Yanbu, raising speculation of a successful Houthi strike, although neither Saudi authorities nor independent reporting has yet confirmed damage to the pipeline or a resulting loss of shipment to Yanbu. If confirmed, however, this would be a significant blow to Saudi crude oil supply given its increasing importance amid ongoing disruptions to movement via the Strait of Hormuz.

Iran is clearly attempting to use this as leverage in their own negotiations, with a goal of tying the Yemen conflict into the broader diplomatic process as the Houthi gains essentially give them another bargaining chip. There are signs of diplomacy moving again, with Iranian Foreign Minister Abbas Araghchi reportedly set to meet GCC foreign ministers in Oman on Monday. While this likely won’t bring an end to the U.S. / Iran standoff, it does have the potential to work toward an agreement to normalize movement through the Strait of Hormuz under the proposed Iran/Oman framework announced last month. The crude oil market appears to be hopeful that this meeting will produce some kind of material result given the reversing of course to trade notably lower at the time of writing. This may also be partly a result of profit taking to end the week following massive gains in each of the previous trading days this week. Obviously, we’ve seen plenty of headlines regarding progress toward normalizing flows through the Strait of Hormuz over the last six-plus months, so I would still treat this with a healthy amount of skepticism. That said, the path toward additional concessions from the Gulf states may become more likely if the Houthis are able to sustain their expanded presence around the Bab al-Mandab Strait.

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Perspective: Morning Commentary for September 11

September 11 – Before turning to today’s market developments, we want to acknowledge that today marks the 25th anniversary of the September 11th terrorist attacks. We remember the nearly 3,000 lives lost, honor the first responders and countless others affected, and reflect on the lasting impact that day had on the United States and the world. Headline CPI held steady at 3.4% in August, matching analyst estimates and tying July for the lowest print since March. The month-on-month gain of 0.4% was the hottest since May but also matched expectations. Excluding the more volatile energy and food prices, core CPI did see a slightly hotter than expected monthly gain, rising 0.3% in August, above the average estimate of 0.2% and marking the fastest uptick since April. However, the year-on-year rise of 2.4% matched expectations and represents the lowest print for the metric since March 2021, an encouraging sign.

Mike Castle
Mike Castle
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Perspective: Morning Commentary for September 10

September 10 – Headline PPI rebounded to a 5.4% year-on-year gain in August, up sharply from the upwardly revised 4.8% seen in July but only slightly above analysts' expectations of a more moderate rise to 5.3%, still bringing inflation back to center stage. In month-on-month terms, this was a 0.4% increase, up sharply from the 0.1% seen in July and the sharpest rate of gain since May. Stripping this down to core PPI, this was a 4.6% year-on-year increase, matching analyst estimates but still representing a notable uptick from the upwardly revised 4.3% seen in July. In my opinion, this is where the bigger concern lies. Obviously, much of the fears of resurgent inflation in 2026 has centered around the ongoing energy shock, which proved true in this morning’s data, but the pervasiveness of inflationary pressures at the core level, stripping out the more volatile energy sector, paints a picture of sticky inflation that does not appear ready to go away on its own. For context, this is the third highest core PPI print of 2026, only 0.3% off the three-plus year high seen back in April. We’ll get another update tomorrow with August CPI set to be released, with the average analyst estimate calling for a 3.4% headline and 2.4% core increase. The longer-term thing to keep in mind here is how much the current inflationary pressures have been concentrated at the producer level—if realized, that CPI print would be 2.0% below headline PPI. That means producers are effectively eating these costs up front, translating to near-term margin pressure, with producers historically tending to pass these costs along down the road for margin recovery which can lead to longer tails of inflation at the consumer level.

Mike Castle
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