Market angst continues to drive investor anxiety ahead of the Consumer Price Index (CPI) release tomorrow. Despite a softer top-line Producer Price Index (PPI), categories most relevant for Personal Consumption Expenditures (PCE) look firmer, and we now estimate the core PCE price index rose 0.24% in August (versus 0.22% before the PPI release). Meanwhile, WTI crude oil breached $100 for the first time since late May, alongside the US 10-year yield hitting 4.90%, which is the highest level since November ’23 and September hike estimates hit 70%.

The market continues to trade in a rangebound tape, with the S&P 500 index posting its 26th consecutive session with intraday trading bands of less than 1%. This is the longest streak in five years. Clear defensive positioning can be seen across the market, with Telco/Cable, Staples, and REITs working higher while Semis, Artificial Intelligence (AI) Infra, and Beta are under pressure early, mostly driven by rates. Within Tech, Apple and other megas are catching a relative bid (alongside a handful of software) while Semis, particularly the higher beta pockets of the space, are under broad-based pressure (feels like top-down sector/factor trading) (h/t Bartlett).

Goldman Sachs sales suggest that investors are taking a more cautious stance, with some sectors seeing increased selling pressure. The recent surge in yields and oil prices has added to investor anxiety, leading to a flight-to-quality trade and a rotation out of riskier assets.