AFS Markets Blog: Morning 15/10/2026

• Meanwhile in markets, your loss is my gain. Stocks and tech are hit hard this morning on the back of the meltdown in former AI darling Coreweave. US Treasury yields are markedly lower, with punters glossing over yesterday’s hot US CPI, hawkish Fed-speak, plus an equally hawkish Fed Beige Book;

• Starting with the Fed, hawkish FOMC members are subtly attempting to put a rate hike back on the table this month. Goolsbee, who heads the Chicago Fed, told Yahoo finance that he found the hot CPI release, with core printing higher than expected at 2.6% on the back of soaring services prices, rather “disappointing”. Goolsbee added that AI, which has another meltdown, risks overheating the economy. Goolsbee’s colleague Daly, President of the San Francisco Fed, stuck with the dovish line that there’s no rush to hike further;

• Fed funds futures price in 7bps of hikes for the October FOMC. Given the fact that we had both the NY Fed President and the Vice Chairman guiding for a hold this month, implied odds of a hike – while low – are still very significant;

• Based on the stubbornly elevated inflation and the likelihood that the next several readings won’t improve and are likely to worsen, the Fed should hike 50bps this year. Either a jumbo hike in December, or a quarter point hike at the end of the month and another one in December. The wildcard is AI, which Fed-speakers have flagged as an inflationary risk. If the AI boom/bubble does truly burst between now and the October FOMC, chances are the Fed does a dovish hike or even hold in December. If AI assets stabilize, we’re on for a hawk fest;

• The onus will be on Chairman Warsh, who will speak at the IMF/World Bank meetings tomorrow morning, to guide markets. Yes, I know Warsh truly hates forward guidance. However, his outspoken colleagues leave him little choice but to chime in and overtly or not so overtly provide guidance;

• Turning to some market commentary, UST yields are down by around 8bps across the curve compared to yesterday’s close. Compared to the post-CPI highs, the declines are a spectacular 20bps for most tenors. S&P 500 futures are down 1.5% from pre-CPI levels, with the tech sell-off responsible for the second leg down. In Asia I clock losses ranging from nearly five percent for the Nikkei to more than seven percent for the Korean casino-like Kospi. AI bellwethers Samsung and SK Hynix are down more than ten percent. Coreweave, the company that rents out AI compute and which started the fire, is down six percent in after hours trading after having plunged more than fifteen percent in regular trading. Fifteen percent is also the yield on Coreweave’s bonds Bloomberg News blares at us. To add insult to injury, according to the folks at Bloomberg Coreweave’s CDS implies fifty percent default odds. At the same time, I also notice Oracle’s CDS spread blowing out to a post-Great Financial crisis high of 288bps. However, it’s not all bad in AI space as TSMC presented a better than expected revenue outlook in its quarterly earnings this morning (earnings also beat expectations);

• In the greater scheme of things, our own AI index is now in correction territory with the decline exceeding the ten percent threshold. On our market screener of AI stocks seventeen out of twenty stocks ae down this week, with SK Hynix, Samsung, and Coreweave suffering the biggest losses of around twenty percent. Only tech behemoths like Microsoft and Meta still have their ATH’s in sight;

• Elsewhere, Brent crude futures are down 1.3% for the day, though at $104.7 a barrel prices remain high. Dutch natgas futures at 85.4 euros per MWh remain within touching distance of their Iran war high. Regarding Iran, there’s been surprisingly little overnight news. Prices seem to be headed lower on the IEA report on high energy prices causing demand destruction;

• In FX space the broad dollar is back to pre-CPI levels, having erased its CPI-induced rally fully. Clearly, AI deflating is dollar negative;

• Looking ahead, we have another day chockful with major central bank speakers because of the IMF/ World Bank autumn meetings, which, by the way, coincide with a G20 central bank/Finance Minister meeting. On the data front we get US retail sales out at the usual time. But the real wait will be for tomorrow morning’s speaking engagement by Fed Chairman Warsh.

‍