Will the Rally Survive? Wall Street Braces for CPI, Earnings and Missiles Over Riyadh

Wall Street begins the week near a record with three tests on the schedule and two wars that keep rewriting it. The S&P 500 rose 0.6% on Friday to 7,811.54, closing the week up 1.2% and the year up 14.1%. On Wednesday morning, one inflation number will show whether that confidence is justified.

Look closely at the yield column. The 10-year Treasury finished Friday at 5.24%, after touching its highest level since 2002, and the average 30-year mortgage rate is at a near three-year high. Those are levels that would normally weigh on stocks, and some of the market is already feeling them. The small-cap Russell 2000 fell 0.9% last week while the big indexes rose.

Futures opened calmly Sunday night. S&P 500 e-minis rose about 0.1% and WTI about 0.4% at the reopen, even after a deadly weekend in Riyadh. Brent traded near $105 and WTI near $92.

Wednesday, 8:30 a.m.: the number that matters

The Bureau of Labor Statistics publishes September CPI at 8:30 a.m. ET on October 14. In August, prices rose 0.4% on the month, and gasoline accounted for more than a third of that increase. Annual inflation held at 3.4% and core eased to 2.4%. Prediction-market traders on Kalshi are betting September lands between 3.5% and 3.7%.

The Fed has already moved once. The committee voted 12–0 on September 16 to raise rates a quarter point to 3.75%–4.00%, its first increase since July 2023. It cited tariffs, the energy shock from the Iran war and AI-driven capital spending. Officials’ median projection pencils in one more quarter-point increase before year-end. A hot reading on Wednesday makes October a live meeting.

Thursday brings the follow-up: September producer prices and retail sales, both at 8:30 a.m. ET. The worst combination for the Fed is prices rising while shoppers pull back.

The banks: the economy’s X-ray

JPMorgan Chase, Goldman Sachs, Wells Fargo and Citigroup report before Tuesday’s open. Bank of America, Morgan Stanley, BlackRock and ASML follow on Wednesday. The headline profits matter less than the details. Loan-loss provisions, card delinquencies and commercial real estate show how households and companies are coping with 5% money. Strong trading revenue can flatter a quarter, so readers should weigh credit quality ahead of the top line.

Chips: TSMC has already shown part of its hand

TSMC hosts its call at 2:00 a.m. ET on Thursday, after guiding third-quarter revenue to $44.6–45.8 billion. Its monthly sales already put the quarter at a record NT$1.49 trillion (about $46.71 billion), up 50% from a year earlier and above guidance. The revenue beat is therefore already known. The market will be grading what TSMC says about the fourth quarter, capital spending and margins, which it guided below second-quarter levels. ASML’s bookings, out a day earlier, will show whether chipmakers are still ordering the machines to build the next wave of capacity.

Riyadh under fire

This is where the week could turn on events outside the calendar. A Saturday strike on Riyadh’s King Khalid International Airport killed at least 12 people, including one American, and injured 309, according to Saudi officials. It was the third attack on the airport in a week, after a Thursday strike killed three Saudis, including a Saudia pilot. The airport was hit again Sunday evening, and Saudi civil aviation authorities said they were assessing damage. A drone also struck a tanker near the Sohar anchorage off Oman on Sunday, according to UK Maritime Trade Operations.

Washington’s posture has shifted. For weeks Trump resisted Saudi pressure to join the fight. On Saturday he told reporters, “We may. We’re going to look at it.” Secretary of State Marco Rubio confirmed an American was among the dead. Thursday’s tanker violence was already near a record: Kpler counted 10 tankers struck in Hormuz between September 28 and October 4. Brent topped $105 that day.

The ceasefire Moscow hasn’t signed

On Sunday morning, Trump posted that an “energy ceasefire” between Russia and Ukraine was in effect immediately. He gave no terms. A Ukrainian official told CNN, “We just read it as you did.” By evening, Zelensky said Russian drones and glide bombs had kept hitting energy infrastructure, including a power plant in Kharkiv. Moscow did not immediately comment. On October 8, Kremlin spokesperson Dmitry Peskov had said Russia saw no point in negotiating a sector-by-sector ceasefire. This is also a repeat: Trump announced a similar truce a month ago, and both sides kept striking.

The backdrop is diesel. On Friday, Treasury issued General License 135, allowing Russian diesel sales and imports. Trump said Russia would supply more than 300,000 tonnes immediately and 500,000 tonnes in November. Zelensky criticized the waiver, warning Moscow would read it as weakness. Trump, for his part, said it was time for Ukraine to get a new president.

The current market regime began on February 28, when U.S.-Israeli strikes on Iran started a regional war. Before that, the Strait of Hormuz carried about a fifth of global oil and LNG supply. Governments have been trying to dampen prices. The G7 and partners agreed to release up to 100 million barrels of emergency stocks over four months.

Inflation followed oil. U.S. CPI went from 2.4% in February to 4.2% in May, then eased to 3.4% by July and August. The Fed held at 3.50%–3.75% for nine months before September’s increase. Warsh became chair in May.

Yemen’s war, largely frozen since 2022, restarted in July. The Houthis swept along the Red Sea coast, and Saudi Arabia and allied Yemeni forces launched a major offensive in early October. In September, the New York Times reported that Trump called off Houthi strikes after commanders had already approved target lists.

Russia’s diesel shortage comes from Ukraine’s drone campaign against its refineries. Moscow has banned diesel exports since July, and the International Energy Agency estimates Russian diesel output is down about 30%.

Europe has its own bond problem. France’s 10-year yield briefly topped 5% in early October, its highest since 2002, before easing to about 4.75% when the government submitted its 2027 budget.

WHY IT MATTERS

Valuations are a bet on the inflation path. Stocks and 5% yields can coexist only while earnings growth, led by AI, outruns the higher cost of money. Each inflation surprise raises the odds of more Fed tightening, which feeds mortgages, corporate borrowing and what investors will pay for long-dated growth.

Oil has two fronts now. Until last week, Hormuz shipping set the risk premium. Missiles reaching Riyadh add pressure on the Saudi homeland, and a U.S. entry into Yemen would put American forces into a second active Gulf theater. Earlier this month, Trump said the U.S. would not attack Iran before the November midterms. Yemen is a separate decision, and he says it is under review.

Politics points at the pump. With the midterms on November 3, the White House wants lower fuel prices. The diesel license is the first easing of Russian diesel sanctions since the invasion to run longer than the standard 30 days. Whether it lowers U.S. prices before Election Day is unclear.

Where the key players stand

• The Fed: Focused on keeping inflation from becoming entrenched. MUFG analysts expect it to skip October and raise rates in December. A hot CPI would test that call.

• The White House: Juggling fuel prices, Saudi pressure and a Ukraine deal it can present before the midterms.

• Saudi Arabia: Under sustained fire and pressing allies for help. The coalition called Saturday’s strike a war crime and vowed a firm response.

• Ukraine: Ready to stop hitting Russian refineries if Russia stops hitting Ukraine’s grid. Zelensky offered elections if Russia accepts a 60-day ceasefire.

• Russia: Publicly cool on a sector-only truce. The Kyiv Independent reports Moscow wants a price for one.

• Europe: Macron said Russia keeps refusing a real energy ceasefire. Von der Leyen and Germany’s foreign minister restated support for Zelensky.

Three ways the week can go (illustrations, not forecasts)

• The soft landing: CPI at the low end of expectations, clean bank credit numbers, a confident TSMC outlook and a quieter Gulf. Yields ease and the rally broadens beyond megacaps.

• The grind: Inflation near 3.7% with solid earnings. Stocks tread water and everything waits for October 28.

• The squeeze: Hot CPI, U.S. strikes in Yemen and another leg up in oil, while global bond yields rise together. Growth, margins and valuations all come under pressure at once.

WHAT TO WATCH

• Monday, October 12: IMF-World Bank meetings open in Bangkok. The full World Economic Outlook drops at 10:00 p.m. ET. Watch how far the Fund marks down its growth forecasts.

• Tuesday, October 13: JPMorgan, Goldman, Wells Fargo and Citi. Watch provisions and card delinquencies.

• Wednesday, October 14: CPI at 8:30 a.m. ET. Also Bank of America, Morgan Stanley, BlackRock and ASML, plus U.K. August GDP, expected to show a 0.1% monthly contraction.

• Thursday, October 15: TSMC call at 2:00 a.m. ET. PPI and retail sales at 8:30 a.m.

• Friday, October 16: Annual Meetings plenary in Bangkok.

• Any hour: A Trump decision on Yemen after his call with Crown Prince Mohammed bin Salman. Any Kremlin statement on the energy ceasefire. UKMTO tanker reports. The 10-year yield: a close above recent highs after CPI would signal markets expect another hike before year-end.

The bottom line: Five trading days will deliver an inflation verdict, the first serious read on third-quarter profits, and a U.S. decision on whether to enter a second Gulf war. Stocks start at the top of the range with very little cushion for bad news. By Friday, the Fed’s October 28 meeting will either look routine or look like a real decision.