Market Pricing in Interest Rate Hike, Diesel at $6 for First Time Ever

• August CPI print came in mostly in line with expectations, leading to a market rally due to increased certainty about the Fed's next rate hike.
• Diesel prices have hit $6 a gallon for the first time ever, and gasoline demand is slightly above 2020 levels, indicating persistent energy cost pressures.
• Preliminary September consumer sentiment data from the University of Michigan shows contractionary territory (47.8), with low current conditions and expectations, which the Fed might view as a positive for taming inflation.

The market is reacting positively to August's in-line CPI print, driven by the certainty of an upcoming Fed interest rate hike. Despite high diesel prices and contracting consumer sentiment, the market views the Fed's path as clear, potentially leading to a pullback in consumer spending that could help tame inflation.