4:20pm: Mixed bag
Stocks closed mixed on Wednesday as investors reacted to new consumer inflation data, which supported expectations for another potential rate cut by the Federal Reserve.
The Nasdaq fell 0.3% after early gains, while the S&P 500 ended nearly flat, and the Dow Jones edged up by 0.1%.
Bitcoin briefly surged to a record above $93,000 before retreating slightly.
The US budget deficit increased significantly to $257 billion in October, driven by unique factors, marking a challenging start to the new fiscal year.
3:20pm: CPI rents may not matter to Fed
Rents, the largest portion of the CPI basket, was a mixed bag, according to Bank of America.
Owners' equivalent rent increased more than anticipated at 0.40% month-over-month compared to the expected 0.34%, while actual rent matched expectations at 0.30% month-over-month, Bank of America noted. Year-over-year, both metrics are declining but still remain higher than pre-pandemic levels, possibly due to existing rents aligning with current market rates.
"That said, asking rent measures are running closer to pre-pandemic levels, which Chair Powell has emphasized." analysts wrote.
"So, CPI rents may not matter much to the Fed at this point."
1:50pm: Dollar going strong
The US dollar is enjoying a strong rally of late, and today's CPI reading gives it fuel to continue.
“Today’s CPI reading has supported the dollar and given it fresh impetus to move higher, while a drop to parity for the euro against the dollar is being openly talked about once more," IG's Chris Beauchamp wrote.
"Trump’s election has only increased the appeal of all things US, and while stocks have taken something of a breather this week, there seems no stopping the dollar.”
12:25pm: Fed eyes December rate cut
Markets were mixed at midday as investors digested new consumer inflation data, which suggests the Federal Reserve may proceed with a December rate cut.
The Dow rose slightly by 0.1%, while the S&P 500 and Nasdaq both dipped, down 0.1% and 0.3%, respectively, after early gains.
October's Consumer Price Index (CPI) rose 2.6% year-over-year and 0.2% from the previous month, in line with forecasts. Core inflation also met expectations, up 3.3% annually and 0.3% monthly.
Movers included Rivian, whose stock surged nearly 18% after Volkswagen increased its investment to $5.8 billion, though Rivian’s shares remain down 50% this year. Spirit Airlines, meanwhile, plunged up to 64% as it explores debt restructuring following failed merger talks with Frontier.
The CME FedWatch tool indicates an 80% probability that traders anticipate a rate cut in December.
11:20am: Sticky inflation
Wells Fargo's analysis of October’s CPI report indicates US inflation remains persistently high.
Consumer prices rose 0.2% for the fourth month in a row, pushing the annual rate to 2.6%, while core CPI, excluding food and energy, increased by 0.3% for the third month in a row.
Analysts noted minimal progress in core inflation, with a three-month annualized rate of 3.6%.
Despite moderated inflation, Wells Fargo expects the Federal Open Market Committee to cut rates by 25 basis points in December. However, Trump’s proposed policies could complicate the Fed’s 2% inflation target, raising new concerns about price stability.
10.16am: Bitcoin tops $90k and then $91k
Bitcoin has broken above $90,000 and continued higher, while the Nasdaq and S&P 500 remain in the red.
The queen of cryptocurrencies broke that line of resistance just after the US inflation reading, before spiking up to $91,700 a short while ago.
Currently, it's working up another push higher at $91,550.
In recent months, bitcoin has shown sensitivity to macroeconomic indicators, especially inflation figures, says crypto research strategist Matt Mena at 21Shares.
The CPI reading alleviates some of the uncertainty weighing on investors' minds, which potentially opened the door for traders to push bitcoin to new highs past the $90k resistance level, he says.
"This may also complete the trifecta we needed to see a $100,000 Bitcoin: 1) Trump’s presidential win; 2) further Fed easing as seen with the recent 25 bps rate cut; and 3) CPI data coming in as expected or better than expected.
"Together, these factors could drive a powerful new wave of investor confidence, setting the stage for Bitcoin’s next major milestone."
9.51am: Mixed open
Stocks have open mixed, with a general lack of direction pervading the Wall Street air.
The S&P 500 has dropped just over one point, ie less than 0.1%, and Nasdaq Composite has dropped 27 points or just over 0.1%.
The Dow Jones has gained 67 points or 0.15% and the Russell 2000 has popped 0.8% higher.
Big risers in the S&P include lithium miner group Albemarle Corp, up 7%; Peter Thiel's Palantir Technologies Inc (NYSE:PLTR), up 5.2% as the firm extends its contract with mining giant Rio Tinto.
Telsa is the big riser among the $1 trillion tech gang, up 4.7%, while smaller rival Rivian has surged 17% higher.
9.15am: US inflation does not produce decisive reaction
US stock futures have now dropped back to flat, as traders chew over the inflation print.
October saw the third consecutive 0.3% month-on-month gain in the core CPI (for those content to take a reading to one decimal place).
This level of core CPI is "not too concerning," says Stephen Brown at Capital Economics, as long as the Fed's more favoured core PCE price gauge is nearer 0.2%, as he forecasts.
But expectations of a lower rise for the core PCE price index in October are likely to change after the October PPI release tomorrow, says Brown.
"A target-consistent gain would keep core PCE inflation on track to fall toward 2% in early 2025 and would dampen speculation that the Fed might decide to remain on pause at its final meeting of the year," he says.
"Nonetheless, with the incoming Trump administration seemingly intent on imposing import tariffs relatively quickly, the return of inflation to the 2% target may prove short-lived."
Quincy Krosby, strategist for LPL Financial, said the CPI "triggered a sigh of relief" in bond markets, with the 10-year Treasury yield inched lower.
"Equity futures edged higher, but with the equity market extended following days of strong performance, the focus was on Treasury yields as concerns over still stubborn inflation has dominated headlines," she adds.
"Still, the 2.6% year-over-year print, while expected, may keep the Fed mindful from declaring victory over its campaign to quell inflation."
8.50am: Wall Street futures perk up on CPI
Stock futures have perked up after the US consumer price index printed in line with expectations.
Headline CPI for October was up 0.2% month-on-month, as in the previous month and as markets expected. This meant it was up 3.3% year-on-year, again the same as the prior month, where it was forecast to remain.
Core CPI, excluding prices for food and fuel, also remained at 0.3%, as forecast. This meant core CPI was up 2.6% on the year, up from 2.4% in September, as expected.
S&P 500 and Nasdaq 100 futures are up 0.2% now, with Dow futures rising 0.15%.
7.30am: Nasdaq and S&P 500 expected to fall
Wall Street stocks are expected to remain on the back foot on Wednesday, as traders and investors keep their powder dry ahead of the CPI inflation numbers later.
Futures for the Nasdaq 100 are down 0.3%, while S&P 500, Dow Jones and Russell 2000 futures are down at least 0.2%.
This comes a day after the Russell and Dow led the losses with falls of 1.8% and 0.9% respectively, while the S&P dropped 0.3% and the Nasdaq 0.1%.
Treasury yields and the dollar surged yesterday as the market continued to chew over the likely ramifications of the US election result, while other beneficiaries of the 'Trump trade' struggled, including Tesla, Trump Media & Technology Group and small-cap stocks.
"This is all ahead of today's US CPI which will be a key factor in the Fed’s decision next month," says strategist Jim Reid at Deutsche Bank.
"That’s particularly important this time around, as there’s been speculation the Fed might skip this meeting and not cut at all, with futures only pricing in a 59% chance of another cut next month."
But he noted that Fed speaker Neel Kashkari, one of the more hawkish central bank voices, suggested yesterday there was still a reasonably high bar for the Fed to pause next month, saying that “there’d have to be a surprise on the inflation front to change the outlook so dramatically”.
The backdrop to today's US October CPI reading is that the core CPI print for September was the strongest in six months at 0.31%.
Economists think that the headline CPI will remain at 0.2% month-on-month, and rise to 2.6% year-on-year from 2.4% last time, while core CPI is seen remaining at 0.3%, keeping the year-on-year reading at 3.3%.
In corporate news, big pre-market movers include Tesla rival Rivian Automotive Inc (NASDAQ:RIVN) after German carmaker Volkswagen agreed to extend their partnership with an extra $800 million investment, taking its total promised backing to US$5.8 billion.
CAVA Group is up 17% pre-market after the Mediterranean restaurant chain upped its guidance overnight.
Instacart (NASDAQ:CART) shares are down 6.5% premarket as the grocery delivery platform's fourth-quarter guidance set off warning sirens.