Rate cut dreams

It was good news-bad news on US inflation Wednesday. The good news is overall inflation continued along its downward path toward the Federal Reserve’s desired threshold of 2%. The bad news is, when you strip out traditionally volatile items like food and gas (though critical to consumers), inflation went up thanks largely to housing and travel. From that angle, things are looking a little worse for American consumers—and Wall Street, too, since investor fever dreams of a half-point rate cut by the Federal Reserve later this month were likely dashed. —David E. Rovella

A big reason the CPI is slowing is that the cost of oil has been dropping, which means gas prices have been lower. Though oil climbed Wednesday as Hurricane Francine crossed over key oil-producing zones in the Gulf of Mexico, the price has fallen from close to $85 a barrel in July to almost $65 a barrel this week. The recent retreat has already seen OPEC+ postpone an output hike, stoking investor concerns that the extra barrels could still be brought to the market closer to 2025. The International Energy Agency—which will issue a revised monthly outlook later this week—said in August the market risked higher inventories next year even if the cartel canceled the output increase. That, of course, is likely good news for consumers.

OpenAI is said to be in talks to raise $6.5 billion from investors at a valuation of $150 billion. The new valuation, a figure that doesn’t include the money being raised, is significantly higher than the $86 billion valuation from the company’s tender offer earlier this year, and cements its place as one of the most valuable startups in the world. At the same time, OpenAI is also said to be in talks to raise $5 billion in debt from banks in the form of a revolving credit facility.

Nvidia Chief Executive Officer Jensen Huang said the scramble for a limited amount of chip supply has frustrated some customers and raised tensions at the artificial intelligence tech darling. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs conference in San Francisco. Huang’s company is experiencing strong demand for its latest generation of chips, called Blackwell. The Santa Clara, California-based business outsources the physical production of its hardware, but—according to Huang—Nvidia’s suppliers are making progress in catching up. “We probably have more emotional customers today,” he told the crowd. “Deservedly so. It’s tense. We’re trying to do the best we can.”

A rally by Nvidia and its fellow tech-travelers spurred a stock-market rebound after traders were done fretting over the inflation data’s effect on rate cut handicapping. The S&P 500 climbed 1.1% and the Nasdaq 100 rallied 2.2%. It was the first time since October 2022 that each gauge erased an intraday loss of at least 1.5%. Chipmakers led gains, with Nvidia up 8.2%. Treasury two-year yields rose on speculation the Fed will move gradually with rate cuts. (Traders cemented wagers on a quarter-point Fed reduction next week.) Here’s your markets wrap.

Caroline Ellison was the star witness in the US government’s fraud case against the onetime crypto wunderkind Sam Bankman-Fried, helping prosecutors unearth crimes inside the now-exploded FTX. The former Alameda Research chief executive is now pointing to her “extraordinarily impactful” cooperation in one of the biggest financial crime investigations in history to convince a judge to spare her from a single day in prison.

Nippon Steel is mounting a last-ditch push to muster support for its $14.1 billion takeover of United States Steel, a deal opposed by President Joe Biden, Vice President Kamala Harris and Donald Trump. Among other stakeholders and some union members, the view is more mixed—with some supporting the tie-up because they worry that another buyer won’t match Nippon’s pledges to invest $2.7 billion into some mills.

Volkswagen threatening job cuts in Germany and warning it may shutter factories there for the first time is a reality check for Europe’s anemic auto market. Nearly a third of major passenger-car plants from Europe’s five largest automakers—BMW, Mercedes-Benz, Stellantis, Renault and VW—were underused last year, producing fewer than half the vehicles they have the capacity to make, according to a Bloomberg News analysis. Sites shutting down would add to concerns that the region is facing a protracted downturn after falling behind competitors.

When it comes to existential threats to humanity, global warming is at the top of the list. And last night in Philadelphia, only one candidate was truly addressing the critical issue, Mark Gongloff writes in Bloomberg Opinion. Harris and Biden have taken a kitchen-sink approach to energy, it’s true, from drilling to windmills and everything in between. Even as fossil-fuel production booms, clean-energy research and development is booming, too. This may not be optimal from a climate standpoint, Gongloff says. but it’s a concession to the difficult reality of managing the world’s biggest economy through an energy transition while also keeping your job and preventing Trump’s far more destructive vision from coming true. It was clear before, during and after the debate, he writes, that only one side truly takes the issue seriously.

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