Stocks Were on Track for the Eighth Consecutive Session of Gains After Core CPI Miss: April 10, 2026

Stocks were on track for their eighth consecutive session of gains after the core CPI missed expectations, supporting optimism that the rise in energy prices had not yet spread to the overall economy. However, pain at the pump alongside recent market turbulence was enough to produce a record low on the UMich consumer sentiment print. The report, along with the sharpest monthly CPI increase in nearly four years, is lifting yields and weighing on rate cut prospects. Indeed, the odds of just one quarter-point reduction from the Fed this year are at only 25%, as fixed-income observers worry that the Middle East conflict will keep inflation above a 3-handle for all of 2026. It’s precisely the adverse impacts on oil and fertilizer that are poised to be increasingly felt in the months to come. At this juncture, WTI is changing hands near $99 as delegations from Washington and Tehran arrive in Islamabad for negotiations this weekend. The nations remain far apart on a plethora of issues, although a continued ceasefire leading to an official end to the war will likely require some acquiescence from both sides. On Wall Street, tech equities were driving the train but the Nasdaq100 and S&P 500 indices have now sunk into losses. The bearish reversal has those benchmarks joining the Dow Jones and Russell 2000 baskets, which were retreating in earlier trading as cyclical sectors are being hurt by tighter financial conditions. Elsewhere, commodities are catching bids while the greenback slips.

Headline Inflation Jumps, But Core Is Benign

The Consumer Price Index (CPI) rose in March at the fastest pace since June 2022, almost four years ago, as pain at the pump offset some deflationary aspects within the report. The 0.9% month-over-month (m/m) and 3.3% year-over-year (y/y) increases arrived in-line with expectations while ascending from February’s 0.3% and 2.4%. The core version of the gauge, which removes food and energy due to their volatile characteristics, came in at 0.2% and 2.6%, a tenth lighter than projections on both fronts and similar to the prior print’s 0.2% and 2.5%. Fuel oil and gasoline, which rose 30.7% and 21.2% m/m, drove the headline spike and easily countered deflation in some significant areas. Indeed, the following categories, along with the extent of their changes, experienced price drops:

• Medical care commodities, 1%
• Heating, 0.9%
• Used cars, 0.4%
• Food at markets, 0.2%

Conversely, new automobiles rose 0.1% while medical care services were unchanged, serving to lighten the impact of heavy energy charges. The headline was also pushed up by apparel, electricity, transportation services, shelter and the restaurant and bar segment becoming 1%, 0.8%, 0.6%, 0.3% and 0.2% more expensive. The developments signal that many segments of the economy have yet to raise stickers materially due to the climb in crude. 

Consumers Express Dour Economic Views

This morning’s University of Michigan’s Consumer Sentiment was the worst result since the gauge’s inception in the 1940s. The headline April print of 47.6 badly missed estimates of 52 and fell from 53.3 in February. The subindices for current conditions and the future outlook worsened from 53.3 and 51.7 to 47.6 and 46.1 because pain at the pump pushed up inflation expectations for the 1- and 5-year time frames to 4.8% and 3.4% from 3.8% and 3.2% in March. Survey respondents cited the Middle East conflict, market volatility and elevated costs as top concerns.

Stocks Are Stretched

Stocks are due for a pullback when considering that economic fundamentals have materially weakened year to date while equities have generally been flat throughout the time period. Indeed, 2026 followed three consecutive years of terrific gains, and the bullish path in 2026 was partially predicated on lightening inflation, subdued energy costs, and expectations for both several rate cuts and an accelerating economy. All four of those factors have reversed notably and are poised to affect asset prices in the coming weeks unless, of course, an immediate end to the war is announced alongside a normalization of the Strait of Hormuz. But in two out of three outcomes, markets are likely to pare some of the advancement because an extended ceasefire or a re-escalation in hostilities will drive selling pressure as peace in the Middle East is already priced in.

International Roundup

China Shakes Off Wholesale Deflation

After declining every month since October 2022, factory gate prices posted a 0.5% y/y climb in March due in large part to higher energy costs, according to the Producer Price Index. The result exceeded the economist consensus estimate for a 0.4% ascent and was a strong reversal from February’s 0.9% y/y decline. While the print reflected the impact of higher oil prices resulting from the Middle East crisis, it is a relief to Chinese officials who have sought to reverse deflation by discouraging steep price discounting and by providing subsidies to stimulate weak domestic demand.

In recent months, China has been aggressively stockpiling oil, natural gas and other similar commodities while expanding its alternative energy capacity to dampen the headwinds of potential supply shocks. Nevertheless, the country, which is heavily dependent on energy imports, saw prices for oil and natural gas extraction jump 5.2%. Higher output prices for both smelting and mining also contributed to gate price inflation.

And Consumer Inflation Eases

China’s Consumer Price Index sank 0.7% m/m but was up 1% y/y in March, a notable easing from the 1% m/m 1.3% 12-month increases in February. The March results were also softer than the m/m and y/y estimates for a 0.2% decline and 1.2% hike. Relative to March of last year, energy for vehicles and the separate transportation and communication category cost 3.4% and 0.9% more. Conversely, a drop in pork stickers helped dampen the climbing expenses of the broader food group, which was up only 0.3%.

Japan Wholesale Inflation Strengthens

Japan’s PPI climbed 0.8% m/m and 2.6% y/y in March, illustrating that wholesale inflation strengthened following the 0.1% and 2.1% increases in February. While the m/m result was a tad below the economist expectation of 0.9%, the annual rate was hotter than the forecast of 2.4%. Nonferrous metals led the y/y climb with a 31.1% jump. The agricultural, forestry and fishery products category and the food and beverage group, furthermore, became 18.9% and 4.3% more expensive. The loftier gate stickers resulted from companies passing higher energy and raw material costs on to customers.