Good morning.

Inflation finally gave the Fed a break. Core PCE rose 3.0% from a year earlier in August, below the 3.3% economists expected, and odds of an October rate hike fell to about 35% from roughly 70% earlier in the week. Capital Economics' chief North America economist Stephen Brown said the data "provide some support to our view that the Fed will pause in October."

The bond market did not get the memo. The 10-year Treasury yield closed at 5.289%, a new 52-week high, and the S&P 500 (SPX) fell 0.3% to 7,651.54 while the Dow slid 0.9%. That capped a lopsided September in which the Nasdaq rose 1.8% and the Dow lost 4.3%, per Yahoo Finance. Cooler prices, hotter yields: the economy's version of ordering a salad and getting the bill for the steak.

Semiconductors

When the memory is this good, investors start worrying about forgetting.

Micron (MU) reported fiscal fourth-quarter revenue of $54.23 billion and GAAP net income of $37.7 billion after Wednesday's close, then guided to $61.5 billion, plus or minus $1.5 billion, for the current quarter. The shares were "little changed" in early trading, Yahoo Finance noted.

That shrug is the story. Micron's stock is up 273% this year, per Stocktwits, so the question on the Street is no longer whether AI needs memory. It's whether this is the top of the cycle. Hours before the print, Bloomberg Tech's Ed Ludlow put it plainly on Wednesday's show: "Have we hit peak pricing?"

Memory has always been the most cyclical corner of the chip business, a boom-bust trade where shortages birth new factories and new factories birth gluts. Micron's answer is that this time the bust is still out of sight.

By the numbers: Revenue was nearly five times the $11.3 billion Micron booked a year earlier, and full-year revenue hit $133.2 billion, The Register calculated. Non-GAAP gross margin was 87.0%, per the release. Capital spending should top $50 billion this fiscal year, with about $25 billion in the first half, according to the earnings call, where management said it has locked in "the vast majority" of 2027 HBM supply at significant price increases.

The bill for that shortage is already landing on gadget makers. Huawei's consumer chief Richard Yu said the company has seen an average $200 increase in smartphone costs and plans to raise prices, Bloomberg reported late Wednesday.

Short-Term Memory: A muted stock after a quarter like this says expectations had already done the remembering for investors. The real test is that $50 billion-plus capex budget: every new fab Micron funds today is supply that arrives in 2028 and beyond, exactly when Mehrotra says the tightness peaks. If AI demand holds, Micron is building into a seller's market. If it cools, the industry will rediscover why memory used to trade like a commodity.

Defense

Boeing's commercial jets keep making headlines for the wrong reasons. Its fighter jets just made one for the right one.

The Navy picked Boeing (BA) to build its sixth-generation F/A-XX carrier fighter, a full-scale development contract worth about $20 billion that covers multiple test aircraft, The War Zone reported. Boeing shares rose 2.25% in extended trading Tuesday, while rival Northrop Grumman (NOC) fell 4.29% on Wednesday.

The jet replaces the F/A-18 Super Hornet, and the development money is only the catapult launch. Production and foreign orders could push the program's lifetime value into the hundreds of billions of dollars, Benzinga noted.

Boeing already won the Air Force's F-47 in 2025, so it now holds the US military's two sixth-generation fighter programs at once. That concentration is precisely what the Pentagon worried about when it tried to freeze F/A-XX in June 2025 over industrial-capacity concerns, before Congress stepped in.

Flight Plan: Winning is the easy part. Boeing's St. Louis operation now has to run two cutting-edge fighter programs on overlapping timelines, a capacity test the Pentagon itself flagged. For Northrop, the loss narrows its pipeline just as defense funds have lagged the AI-heavy tape (the Global X Defense Tech ETF is down 9.36% this year), leaving its bombers and missiles to carry the growth story.

Media & Entertainment

Hollywood loves a sequel. Bond investors just got handed the bill for one.

Paramount Skydance (PSKY) sold $30 billion of investment-grade bonds in eight tranches on Wednesday, pulling roughly $109 billion of orders, The Edge Malaysia reported. That completes a roughly $52 billion financing package, including $12.4 billion of junk bonds and $7.5 billion of loans, to fund its takeover of Warner Bros. Discovery (WBD). A judge has approved Paramount's settlement with state attorneys general, and the merger is set to close next week.

Demand was the happy ending. The price was the plot twist.

Since Paramount agreed to the deal in February, the 10-year Treasury yield has climbed about a full percentage point, a Bloomberg Intelligence credit analyst noted on Wednesday's Bloomberg Intelligence episode; it closed Wednesday at 5.289%. The longest-dated junk dollar notes were marketed around a 9% yield, 24/7 Wall St. reported. On a $52 billion stack, every extra percentage point of interest is roughly $520 million a year, by our math.

The ratings agencies are split down the middle. S&P rates the high-grade debt BBB-, the lowest investment-grade rung, while Moody's sits one notch below. The longest-dated high-grade notes priced about 3.65 percentage points over Treasuries, and leverage at closing is about 7 times earnings, with a target of 3.75 times by 2028, according to the same Edge report.

Final Cut: The deal now lives or dies on deleveraging. Hitting the savings target and turning free cash flow toward debt paydown is the script. Media mergers rarely shoot it on schedule, and with yields at multi-year highs, any slip gets expensive fast. Paramount stock was already down 25% this year as of Tuesday's close.

Wednesday's recap: inflation cooled, yields didn't, Micron made a fortune and got a polite nod, and Paramount found $109 billion of eager lenders at prices nobody would call cheap. Today brings ISM manufacturing and Nike's earnings after the close, all before Friday's jobs report gets the last word.

That's the tape. We'll see you at the open. — AllThingsWallSt