Stock Market Today: Dow futures steady as CPI report looms

All three major U.S. stock indexes were moving higher in Wednesday’s afternoon session, with the Dow Jones Industrial Average shaking off earlier declines, as investors continued to assess November’s as-expected consumer-price index.

With respect to next week’s Federal Open Market Committee meeting, the November CPI data was “almost certainly good enough for one last consecutive rate cut,” according to a team at Monetary Policy Analytics in Washington.

Disinflationary progress in the U.S. continues to show signs of stalling with the headline CPI inflation rate accelerating in November and the core reading trending sideways, according to economists Lindsey Piegza and Lauren Henderson at Stifel, Nicolaus & Co.

“While not enough to dissuade the Fed from further action near term, looking out to 2025, an ongoing lack of progress should imply a policy pivot sooner than later,” they wrote in a note. “After all, adjusting rates too low or too fast runs up the risk of reigniting inflationary pressures and potentially reversing progress already made.”

The rate-setting Federal Open Market Committee “is likely to materially revise its forecast for additional policy adjustments over the next 24 months, resulting in a reduced number of cuts,” the economists said.

Technology stocks were helping prop up the broader market on Wednesday while the Dow was struggling for direction.

The S&P 500’s communication services sector was the best performer among the large-cap index’s 11 sectors on Wednesday morning, up 2.4%, while the information technology and consumer discretionary sectors were rising 1.4% and 1.5%, respectively, according to FactSet data.

At the other end of the spectrum, the S&P 500’s health care sector was falling 1.2%, while the real estate sector was down 0.4%, according to FactSet data.

Hershey Co.’s stock was posting its sharpest daily loss in more than two years on Wednesday after Oreo maker Mondelēz International Inc. said it wasn’t planning any larger acquisition after speculation of a tie-up between the two food giants.

Hershey’s stock fell as much as 6.4%, which would be its steepest loss since May 18, 2022, when it fell 7.9%, according to Dow Jones Market Data.

The losses came on top of a 3.3% drop on Tuesday, and a gain of 10.9% on Monday when Bloomberg cited unnamed sources about merger talks between the two countries.

While Mondelēz didn’t comment specifically about a possible deal with Hershey, the company said on Wednesday it’s currently interested only in “bolt-on” deals, which are smaller, bite-sized acquisitions to grow its business in the vein of its purchases of Clif, Ricolino and Chipita.

Instead of pouring money into a big merger, Mondelēz said it’ll buy back $9 billion in stock.

Mondelēz’s stock rose 3.5% on Wednesday. Its stock price has fallen 11.8% so far in 2024, while the S&P 590 has risen 27.4%. Hershey’s stock is down 3.7% so far in 2024.

Oil futures climbed Wednesday after the U.S. Energy Information Administration reported a third straight weekly decline in domestic crude inventories.

Prices were also supported as China’s recent economic stimulus measures lifted prospects for energy demand and as a report from Bloomberg that the U.S. is considering new oil sanctions on Russia raised worries about tighter global supplies.

On Wednesday, the EIA reported a decline of 1.4 million barrels in U.S. commercial crude inventories for the week ended Dec. 6. The report was expected to show a decline of 600,000 barrels on average, according to a survey of analysts conducted by S&P Global Commodity Insights.

The EIA also reported weekly supply gains of 5.1 million barrels for gasoline and 3.2 million barrels for distillates. The S&P Global Commodity Insights survey forecast inventory gains of 1.7 million barrels each for gasoline and distillates.

West Texas Intermediate crude for January delivery was up 73 cents, or 1.1%, to $69.32 a barrel on the New York Mercantile Exchange. February Brent crude added 69 cents, or 1%, at $72.88 a barrel on ICE Futures Europe.

Wednesday’s reading on U.S. inflation sets the Federal Reserve up to cut interest rates next week, but the Fed may pause its rate-cutting cycle at its first policy meeting next year, according to Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management.

But “2025’s monetary policy decisions seem likely to be more contentious as fiscal and trade policy start a new chapter under the Trump administration,” Ausenbaugh said in emailed comments Wednesday. “We think the Fed will move gradually, perhaps skipping January before cutting again in March.”

Fed-funds futures on Wednesday indicate traders largely expect the Fed will cut its benchmark rate by a quarter percentage point this month to a target range of 4.25% to 4.50% — and will maintain it at that level at its policy meeting in late January, according to data from the CME FedWatch Tool, at last check. President-elect Donald Trump will be inaugurated on Jan. 20.

The U.S. stock market was mostly rising Wednesday morning as investors weighed new inflation data from the consumer-price index. The S&P 500 was up 0.7%, while the Nasdaq Composite was rallying a sharp 1.3% and the Dow Jones Industrial Average slipped 0.1%, according to FactSet data, at last check.

Wednesday’s November CPI showed little progress being made toward the Federal Reserve’s 2% target and raises doubts about the ability of officials to cut rates as much as they expected, one chief investment officer said.

“The analysis of recent data provides a mixed view on inflation: price pressures have eased considerably, but every passing month provides further evidence of a stickiness to inflation that will challenge the current forecasts for interest rate cuts next year,” said Jim Baird, Chief Investment Officer with Plante Moran Financial Advisors.

In an email, Baird added that chances are growing that officials will need to hold rates a bit higher for longer next year.

Instead, fed-funds futures traders were factoring in slightly greater chances of further easing by the central bank through the end of 2025. They drifted toward the increased likelihood of anywhere between two and four quarter-point reductions by next December, after accounting for a Fed rate cut next week, according to the CME FedWatch Tool.

The Dow Jones Industrial Average on Wednesday was erasing its early gains in less than 30 minutes after the opening bell, but the rally in the tech-heavy Nasdaq Composite was picking up speed after November’s inflation report cleared the way for the Federal Reserve to cut interest rates at its policy meeting next week.

The Dow was losing 71 points, or 0.2%, at around 44,178, after rising over 100 points after the bell.

The Nasdaq was advancing 1.3%, to around 19,937. Shares of the so-called Magnificent Seven were leading the gains, with Alphabet Inc.’s stock up nearly 4%, while Meta Platforms Inc.’s stock was jumping 2.3%, according to FactSet data.

The S&P 500 was also higher on Wednesday morning, up 0.7% to trade around 6,076.

The slightly higher inflation rate in November on a year-over year basis based on fresh headline data from the consumer-price index “won’t be enough to spoil Christmas,” according to Chris Zaccarelli, chief investment officer for Northlight Asset Management.

The Federal Reserve is likely to “continue on their easing path,” Zaccarelli said in emailed comments Wednesday. “So, the markets have the green light to rally into the end of the year.”

The economy is growing while the labor market and consumer spending are “holding up,” which, when combined with market expectations for a Fed rate cut in December, is “a perfect cocktail for animal spirits looking for an excuse to buy,” according to Zaccarelli.

Wednesday’s inflation report comes as “a relief to a market that did not want any surprises interrupting this year-end Santa rally,” according to Lara Castleton, Janus Henderson Investors’ U.S. head of portfolio construction and strategy.

“Transportation and shelter were the largest contributors but shelter costs did show a slight downtick from last month, which is an encouraging sign,” Castleton wrote.

While the Federal Reserve looks poised to cut its policy rate by 25 basis points next week, “there is clearly a conflicting dynamic shaping up for 2025,” she wrote, noting that a reignition of inflation remains “one of the top concerns for clients next year.”