Good Afternoon. On this day in 1889, Fusajiro Yamauchi founded Nintendo in Kyoto to make hanafuda cards. The company eventually found a bigger game, but its first product wasn't a forecast of every market it would enter.

Wall Street learned a similar lesson about first impressions today. A strong business survey looked like good news until rising costs revived the case for more Fed hikes; oil and Treasury yields climbed, and stocks slipped. Earnings from workwear, payroll, food and housing companies showed why sales growth alone won't settle the question.

—Rosie, Wyatt, Evan & Conor

🔥 What’s Hot: 🔥

🥶 What’s Not: 🥶

🔢 Big number: 5.12% — the approximate 10-year Treasury yield Wednesday afternoon, a level that doesn't make mortgages, corporate financing or stock valuations easier.

A hotter economy doesn't always help the stock market. U.S. business activity accelerated in September, but the same survey suggested companies' costs are rising fast enough to keep inflation and interest-rate worries alive.

The news: The flash composite purchasing managers' index reached 58.4, up from 56.0 in August, its strongest reading in more than five years. The 10-year Treasury yield climbed to about 5.12% from 4.96% late Tuesday, while the S&P 500 was down close to 0.7% Wednesday afternoon. Oil's rebound added another cost pressure. A higher yield raises borrowing costs and makes future corporate profits worth less in today's dollars.

Big picture: The Fed raised rates last week because inflation hadn't cooled enough; this report gives officials another reason to be cautious. Watch whether the survey's faster cost growth reaches consumer prices, because strong demand isn't as comforting when businesses may need to charge more for it.

Source: Associated Press

Cintas didn't need a calm economy to grow. The workwear and facility-services provider reported higher sales and a wider operating margin, suggesting customers still pay for the services that keep workplaces running.

The news: Fiscal first-quarter revenue rose 10.9% to $3.01 billion, including 8.9% organic growth. Operating margin increased to 23.6% from 22.7% a year ago even with $14.4 million of costs tied to its proposed UniFirst acquisition. Cintas also lifted its full-year adjusted earnings guidance. The results don't depend on an acquisition simply enlarging the top line.

What’s next: The Federal Trade Commission is still reviewing the UniFirst transaction, which Cintas expects to complete before year-end. If it goes through, the next test won't be just adding revenue; it'll be integrating another business without losing the margin gains that made this quarter stand out.

Source: Cintas

Paychex's results show why the number of paychecks processed isn't the whole story. More of its growth is coming from higher-value services that employers use to manage benefits, insurance and human resources.

The news: Fiscal first-quarter revenue climbed 6% to $1.63 billion, while operating income rose 14% to $619.2 million. Diluted earnings per share increased 14% to $1.21. Management credited strength in its professional-employer-organization and insurance operations, and it introduced an AI recruiting tool called WISE Hire. That mix helped earnings grow faster than revenue even as the largest segment missed Wall Street's expectations.

Bottom line: Payroll demand can soften when smaller employers slow hiring, but recurring advisory and benefits services may cushion that cycle. The useful question now isn't whether Paychex can add AI to a product brochure; it's whether customers adopt it and keep paying for a broader set of services.

Source: Paychex

General Mills' sales held steadier than its headline decline suggests, but that doesn't make the consumer backdrop easy. Shoppers are still making careful choices, and product innovation has to turn interest into enough volume to offset cost pressure.

The news: Fiscal first-quarter net sales fell 3% to $4.4 billion, largely because the company sold its U.S. yogurt business. Organic sales were flat, while adjusted operating profit declined 11% in constant currency. Reported operating profit fell much more sharply because last year's quarter included a roughly $1 billion gain on that sale. General Mills kept its full-year outlook unchanged rather than treating one better-than-feared sales result as an all-clear.

Big picture: A divestiture can make year-over-year numbers noisy, but the underlying issue is simpler: flat organic sales and lower adjusted profit aren't a strong combination. Watch whether new products improve volumes and whether the company can protect margins without relying on last year's one-time gains.

Source: General Mills

KB Home's latest quarter makes the jump in bond yields feel less abstract. A buyer comparing monthly payments can't ignore a higher mortgage rate, even when a builder is offering a home that fits.

The news: Revenue fell 20% to $1.30 billion in its fiscal third quarter as deliveries dropped 19% to 2,732 homes. The homebuilding operating margin narrowed to 5.2% from 8.1% a year earlier. Management said conditions had weakened since June as higher mortgage rates hurt affordability; homes built to order represented nearly three-quarters of deliveries, helping the margin improve sequentially but not restoring last year's economics.

What’s next: With the 10-year Treasury yield back above 5%, relief for buyers may not arrive quickly. Watch whether incentives and smaller homes can keep orders moving without eating too deeply into margins; a builder can sell more homes and still earn less on each one.

Source: KB Home

Britain's latest business survey delivered the combination central bankers dislike most: output still expanded, but at a slower pace while companies reported more expensive inputs and faster price increases.

The news: The flash composite purchasing managers' index slipped to 51.7 in September from 52.5 in August. That's still above the 50-point line that signals expansion, but S&P Global said the survey was consistent with quarterly growth of only about 0.1%. Services companies raised their prices at the fastest pace in four months, with energy costs adding pressure. Manufacturing improved, but it didn't erase the wider slowdown.

Bottom line: The Bank of England can't judge this report by growth alone or inflation alone. If firms pass higher fuel costs on while demand weakens, policymakers face a harder choice between supporting activity and preventing another round of price increases.

Source: S&P Global

Germany's economy gave Europe a brighter growth signal, although energy costs are still threatening to spoil it. Services returned to expansion after five months of contraction, adding breadth to a manufacturing recovery.

The news: Germany's flash composite purchasing managers' index rose to 53.8 from 51.8 in August, the strongest reading in almost a year. The services index climbed to 52.9 from 49.7, while manufacturing remained above the 50-point expansion line. Businesses also reported their fastest input-cost increase in four months, much of it tied to fuel and energy.

Big picture: A broader rebound is encouraging because it isn't resting on factories alone. Yet the same energy shock that hurts Britain can shrink German margins or raise prices; the next question is whether new orders and employment can keep growing after those higher bills arrive.

Source: Investing.com

China's president is heading to Washington for talks on trade and technology, but a proposed group of Chinese business leaders isn't traveling with him. That's a small change with a potentially meaningful signal about the limits of this visit.

The news: Reuters reported that Xi Jinping will arrive without the business delegation Beijing had explored, citing two people familiar with the plan. The reason wasn't settled publicly, and China's foreign ministry said it had no relevant information. U.S. company executives are still expected at Thursday's state dinner. The absence doesn't rule out agreements, but it narrows the visible corporate channel for dealmaking during the visit.

What’s next: Trade, AI and access to critical materials are still on the table, and a photo opportunity won't settle them. Watch for specific rules or signed commitments rather than treating a cordial meeting as evidence that companies can plan around a durable thaw.

Source: Reuters

Q: What do you call a snowman with a six-pack?

A: An abdominal snowman.

Modified duration: a bond measure that estimates how much its price changes when yields move by one percentage point, assuming other factors don't change.

In a sentence: With the 10-year Treasury yield climbing today, modified duration helps explain why longer-dated bonds can lose value even when their promised payments haven't changed.

📬 Need more smart reads? See newsletters we recommend →
You can choose one, a few, or none. Completely up to you.