Friday’s flash PMIs described an economy running hot, and the price detail inside them mattered more than the headline.

What was expected

Forecasters looked for the S&P Global manufacturing PMI to ease to 55.5 from September’s 55.9, and for the services index to slip to 58.0 from 58.8.

What came out

Manufacturing beat. The index rose to 56.0, a 53-month high. Services landed a tenth of a point short at 57.9, down from 58.8. The composite output index eased to 57.6 from 58.4, a two-month low that still sits at a strong level. S&P Global’s chief business economist, Chris Williamson, said the survey is consistent with GDP growing at roughly a 5% annualized rate.

Beneath the steady headline, demand was firmer. New orders grew at their fastest pace in more than four and a half years, and services new business expanded at its quickest since March 2022. Factory hiring ran at the fastest rate since March 2012.

Prices were the catch. Selling prices across goods and services rose at the sharpest pace since August 2022, and input costs climbed at the fastest rate since November 2022, excluding September. Firms pointed to oil, energy and freight, along with steel, aluminum and copper. Supplier delivery times stretched the most since 2022.

What the market did

The PMIs did not set the tone. The S&P 500 fell 0.52% to 7,623, the Nasdaq lost 0.21% to 25,955 and the Dow dropped 1.24% to 52,214. Concern over how heavy AI infrastructure spending will be funded and repaid extended Thursday’s chip selloff, and both major indexes touched five-week lows early in the session. Semiconductors were the weakest group.

Oil added pressure. West Texas Intermediate rose 3.8% to $103.27 and Brent gained 3.1% to $116.72 on Middle East escalation, which weighed on airlines and other fuel users.

The 10-year Treasury yield closed at 5.00%, up 4 basis points from 4.96%. That is a modest move. It remains below the 5.09% of the previous Friday.

Why the price data counts

Strong orders, rising employment and accelerating prices are the combination that leaves a central bank little room to ease. Williamson warned that consumer inflation is likely to climb further above the Federal Reserve’s target in coming months. The Fed meets on 27 and 28 October. Traders largely expect a hold, with a rate rise later in the year increasingly in view.

For equities, the risk runs through valuations. Higher rates lower the present value of distant earnings, which hits long-duration technology shares first.

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