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US stocks were mixed in early trading on Wednesday as investors weighed fresh consumer inflation data that looked to keep the Federal Reserve on pace for another rate cut next month.
The Dow Jones Industrial Average (^DJI) rose just around 0.1%, coming off a steep slide after stocks closed lower across the board. Both the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) fell into the red after initially rising earlier in the session, down about 0.1% and 0.3%, respectively.
Consumer prices rose largely as forecast in October, with the Consumer Price Index rising 2.6% year over year and 0.2% on a month-over-month basis, both meeting forecasts. Rises in “core” inflation — of 3.3% year over year and 0.3% month over month — also met estimates.
Inflation has taken center stage again after the post-election rip higher hit a wall. The FOMO market lost some mojo Tuesday as it ponders whether President-elect Donald Trump’s policies could boost inflation as well as the economy. That has helped push Treasury yields higher, promising higher borrowing costs all around.
The report appears to keep the Federal Reserve on track for a December rate cut. Minneapolis Fed president Neel Kashkari told Yahoo Finance that inflation data was the key focus for the central bank in the weeks ahead, saying at Yahoo Finance’s Invest conference that any surprise to the upside “might give us pause.”
According to the CME FedWatch tool, 80% of traders expect a rate cut in December.
Meanwhile, Trump has named Tesla (TSLA) CEO Elon Musk to co-lead a new Department of Government Efficiency — another challenge for analysts trying to assess the electric vehicle maker’s prospects. The incoming president’s picks for his Cabinet are also being closely watched for impact on his policies and the economy, though DOGE is not a government agency.
Tesla’s stock erased earlier gains as shares attempted a comeback from a 6% fall on Tuesday. Meanwhile, shares of Rivian (RIVN) jumped by double digits after Volkswagen raised its investment in the rival electric carmaker to $5.8 billion.
Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards
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Food inflation still sticky
Yahoo Finance’s Brooke DiPalma reports:
Food inflation remained sticky in October as select items drove prices higher.
The cost of groceries climbed 1.1% compared to a year ago, per data from the Bureau of Labor Statistics, and 0.1% compared to September. The overall food category increased 2.1%, driven higher by the cost to dine out, which was up 3.8%. The growth in prices of restaurant meals has outpaced the growth in grocery prices in 2024 as rising wages continue to contribute to costs.
Overall, the Consumer Price Index (CPI) increased 2.6% over the prior year in October.
“During the pandemic, we had a tremendous amount of acceleration, and that’s essentially fully back to sort of where it was prior to the pandemic,” BLS economist Steve Reed said of grocery prices.
Egg prices, which are historically volatile, contributed to the stubborn grocery inflation. The item saw a 30.4% year-over-year increase but a 6.4% decline month over month, the largest since April.
Prices of oranges, including tangerines, also boosted overall food prices. The fruit has been affected by drought, extremely high temperatures caused in part by the El Niño climate pattern, and citrus greening, a bacterial disease. Production in Brazil is down 9% year over year, per the US Department of Agriculture.
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Inflation progress ‘a slow grind’ as outlook remains uncertain
New inflation data out Wednesday showed consumer prices rose as forecast in October, keeping the Federal Reserve on track to lower interest rates again in December.
“There is progress on inflation,” Claudia Sahm, chief economist at New Century Advisors, told Yahoo Finance following the data’s release. “We are pointed in the right direction, but it has been a slow grind. And this is another month that fits in that slow grind.”
The outlook remains uncertain as economists warn of another potential inflation resurgence following the election of Donald Trump as the nation’s next president.
Trump and his proposed policies have been viewed as potentially more inflationary due to the president-elect’s campaign promises of high tariffs on imported goods, tax cuts for corporations, and curbs on immigration.
Immediately following Wednesday’s release, markets continued to price in another 25 basis point rate cut in December after the central bank cut rates by that amount last week. Traders currently see a more than 80% chance the Fed cuts rates by 0.25% next month, up from just under 60% on Tuesday, according to data from CME’s FedWatch Tool.
“It is clear that the Federal Reserve’s job is still unfinished and that markets are correct in repricing federal funds rate expectations going forward,” Raymond James’ chief economist Eugenio Alemán wrote in a note to clients following the report.
“Under this environment, it is only oil and gasoline prices that are keeping inflation contained. That is, any surge in oil and gas prices could severely compromise the Fed’s inflation target. The Fed should be particularly concerned about the services less energy component of CPI.”
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Stocks open higher after inflation data
US stocks moved to the upside in early trading on Wednesday as investors weighed fresh consumer inflation data that met economist forecasts as the central bank debates another rate cut next month.
The Dow Jones Industrial Average (^DJI) opened about 0.2% higher, coming off a steep slide as stocks closed lower across the board. Both the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) rose roughly 0.1%.
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Inflation holds steady in October
A closely watched report on US inflation showed consumer price increases remained consistent during the month of October, according to the latest data from the Bureau of Labor Statistics released Wednesday morning.
The Consumer Price Index (CPI) increased 2.6% over the prior year in October, a slight uptick from September’s 2.4% annual gain in prices. The yearly increase matched economist expectations.
The index rose 0.2% over the previous month, matching the increase seen in September and also on par with economists’ estimates.
On a “core” basis, which strips out the more volatile costs of food and gas, prices in October climbed 0.3% over the prior month, matching September, and 3.3% over last year for the third consecutive month.
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Good morning. Here’s what’s happening today.
Here’s a look at today’s key economic and market themes: Wall Street awaits fresh consumer inflation data, while Spirit Airlines (SAVE) plummets 70% amid looming bankruptcy concerns. US mortgage rates continue their post-election climb following Donald Trump’s victory. Meanwhile, SoftBank Group (SFTBY) plans to build a supercomputer using Nvidia’s (NVDA) new Blackwell chips, underscoring its ambitions in AI.
Economic data: MBA Mortgage Applications, (week ending Nov. 8); Consumer Price Index, October; Real average hourly earnings, October
Earnings: Cisco (CSCO)
Here are some of the biggest stories you may have missed overnight and early this morning:
Kashkari: Inflation surprise could prompt Fed ‘pause’
Stocks have ‘room to run’ but that doesn’t mean buy: Bridgewater CIO
Inflation ‘unlikely to show much progress’ in October
Spotify forecasts profit above estimates, stock jumps
US mortgage rates rose again in week after Trump’s victory
