Global equities diverged last week. The US 30-year Treasury yield briefly topped 5.6%, its highest since 2002, the 10-year rose above 5.2% and the Dollar Index hit 101. Hints from some Fed officials of a wait-and-see stance on hikes and Friday's softer payrolls eased tightening fears, while strong Micron earnings and Broadcom's $42 billion financing for Anthropic lifted semiconductors again. The Philadelphia Semiconductor Index rose 3.69% and the Nasdaq briefly hit a record high, but equities in Europe, China, Hong Kong and India came under pressure.
This week's WEFC covers four topics: Micron's earnings, softer PCE and payrolls, China's PSL cut, and why government and corporate interest burdens have diverged.
This Week's WEFC Preview
Rate Pressure Pushed Off: Softer PCE and Payrolls Keep October Hike Odds Down
- Core PCE momentum slowed after BEA revisions. August headline PCE rose 0.31% MoM and 3.42% YoY, and core rose 0.25% MoM and 3.01% YoY, both well below expectations. The methodology revisions cut prior headline YoY from 3.7% to 3.4% and core from 3.3% to 3.0%.
- Short-term trend is near the safe threshold, but the level is still high. The 6-month average core MoM fell to 0.23%, close to the 0.2% level regarded as safe, and the 3-month annualized rate reached 2.1%, the lowest since 2024. Core YoY of 3.01% still sits about one percentage point above the Fed's 2% target.
- Payrolls rose just 29K, removing the labor market as a source of inflation pressure. The print compared with 90K expected, the prior two months were revised down by 60K, and the 3-month average slipped to 51K. Unemployment rose to 4.2% on higher participation (61.8%), and average hourly earnings slowed to 3.0% YoY, the lowest since 2021.
- Market pricing moved toward no change. FedWatch put October no-change odds at nearly 70% after the PCE release and nearly 90% after payrolls. October hike odds fell from 70% to around 25% after Williams and Jefferson saw no urgency, while the rate-cut probability on the same chart stays near zero.
- The next test is October 14 CPI, 13 days before the October 27-28 FOMC. Our view is that only a small preventive hike is needed this year, with a likely pause next year, provided core PCE keeps decelerating from the 0.23% 6-month average.
▌Related Charts & Articles: US - Personal Consumption Expenditure Price Index [PCE] · US - PCE Price Index (MoM) · US - Nonfarm Payrolls vs. Unemployment Rate · US - FedWatch Probability of Rate Hike/Cut · US - Core CPI - Prediction Market-Implied Forecast
Micron's Super Cycle: Q3 Revenue +379.2% YoY at an 87% Gross Margin
- Revenue of $54.23 billion rose 30.8% QoQ and 379.2% YoY at an 87% Non-GAAP gross margin. Non-GAAP EPS of $33.42 versus $25.11 in Q2 also exceeded the top of guidance, along with revenue and margin.
- All four business units grew, led by Core Data Center. Revenue there rose 56.2% QoQ to $18.00 billion at a 90% gross margin. Cloud Memory added 18.2% to $16.28 billion, Mobile and Client 13.8% to $13.11 billion, and Auto & Embedded 47.2% to $6.82 billion.
- Agentic and physical AI are widening the demand base. 2027 HBM capacity at Micron is essentially sold out at sharply higher contract prices, and L4 and higher autonomous vehicles need over 200 GB of DRAM, more than 10 times L2+/L3 models.
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About Weekly Economic and Financial Commentary (WEFC)
The MacroMicro WEFC is published weekly, delivering rigorous analysis and in-depth insights on the most critical market-moving events. Coverage spans equities, foreign exchange, bonds, commodities, global central banks, geopolitics, and the international political economy.
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