Wall Street spent the week swinging between relief and worry. Stocks rallied hard on Monday, then slipped on Tuesday, when a hotter-than-expected inflation report arrived just as Federal Reserve officials were openly talking about raising interest rates again.
The swings followed the S&P 500’s biggest weekly drop since April 2025.
Hot Inflation Data Revives Rate-Hike Bets
The Consumer Price Index rose 0.4% in October, the Labor Department said. Economists polled by Reuters had expected a 0.3% gain. Core prices, which leave out food and energy, rose 0.3%, against a forecast of 0.2%.
Traders now put the odds of a quarter-point Fed rate hike in December at 84%, according to Yahoo Finance, and the odds of a half-point move jumped from 0% to 15% in a single day. Fed Governor Christopher Waller said the central bank should raise rates in December even if inflation cooled last month, and should consider a half-point hike if the picture worsens. Dallas Fed President Lorie Logan said the Fed needs at least two more quarter-point increases.
Not every official sounded that hawkish. Kansas City Fed President Jeff Schmid said he thinks the current policy rate is “fairly accommodative,” while Fed Vice Chair for Supervision Michelle Bowman stopped short of calling for hikes but called inflation the central bank’s top priority. You might also be interested in reading our piece on stocks that Wall Street analysts see as affordable.
Stocks Rebound, Then Stall
The Dow Jones Industrial Average fell 0.30% on Tuesday, the S&P 500 lost 0.38% and the Nasdaq Composite dropped 0.74%. Declining stocks outnumbered gainers by 2.27-to-1 on the New York Stock Exchange. That wiped out part of Monday’s rally, when the S&P 500 rose 2.35% for its biggest daily gain since April 8 as falling oil prices eased inflation fears. After the report, shorter-term Treasury yields jumped and the US dollar strengthened.
Last week’s selloff came after a sweeping Democratic victory in the US midterm elections, which stirred worries that new regulations could hurt the AI trade. For another angle on where analysts see room to run, see our list of NYSE stocks with huge upside potential.
James McCann, senior economist at Edward Jones, told Reuters that “there are some fears that underlying price pressures are starting to build again.” The Labor Department releases producer prices on Friday, and CME FedWatch showed the odds of a December rate hike above 80% even before Tuesday’s report.
We shared the expanded list of 10 Stocks Analysts Are Upgrading Right Now here. You can find the top 5 stocks below.
