Wall Street Ticks Up as Inflation Data Fuels Hopes for Fed Rate Cut

In October, the consumer price index (CPI) increased by 0.2% for the fourth consecutive month, according to the Labor Department’s Bureau of Labor Statistics, showing a yearly rise of 2.6%. When food and energy, which are more unpredictable, were excluded, the CPI saw a 0.3% rise in October.

These numbers matched the predictions made by economists. Following the release of this data, U.S. stock index futures, which had started the day lower, turned around.

“With the upcoming new administration, the market is somewhat tense about potential inflation scenarios for 2025,” explained Ross Mayfield, an investment strategist at Baird. “The CPI aligning with expectations gives the market a moment to relax and shift focus to recent influential factors.”

Post-release of the data, the likelihood of a 25-basis point reduction in interest rates at the Federal Reserve’s December meeting escalated dramatically, rising from about 58% to 82%, as tracked by CME FedWatch Tool.

Neel Kashkari, President of the Minneapolis Federal Reserve, spoke on Bloomberg TV, expressing his confidence that inflation was on a decline, supported by the latest CPI figures.

The Dow Jones Industrial Average increased by 98.25 points or 0.22%, reaching 44,009.23. Similarly, the S&P 500 rose by 8.33 points or 0.14%, totaling 5,992.32, and the Nasdaq Composite grew by 17.34 points or 0.09%, hitting 19,298.74.

Stocks of smaller companies, which are sensitive to rate changes, as seen in the Russell 2000 index, saw a 0.9% increase, and the real estate sector surged by 1.3%.

Consumer discretionary stocks also performed well, particularly highlighted by a 4% increase in Tesla shares following the announcement by Trump that CEO Elon Musk would co-lead the newly established Department of Government Efficiency.

On the other hand, communication services stocks dipped by 0.5%, dragged down by Meta Platforms, following a judicial decision that the owner of Facebook must face an antitrust trial regarding its acquisitions of Instagram and WhatsApp.

Despite the overall market downturn on Tuesday, influenced by rising U.S. Treasury yields due to anticipations about inflation-inducing policies from President-elect Donald Trump, the major indexes recovered somewhat after Wednesday’s CPI data, with the benchmark 10-year Treasury yield retreating to below 4.4%.

Even with the declines noted on Tuesday, Wall Street has maintained a generally positive outlook over recent days, bolstered by Trump’s pro-business agenda and potential tax reductions that could enhance corporate growth, despite ongoing concerns about possible high tariffs and inflation effects.

Spirit Airlines saw its shares plummet by 56.5% following reports that it might be preparing for bankruptcy protection, although the company mentioned it was negotiating with creditors.

In contrast, EV manufacturer Rivian experienced a 19% surge in its stock after Volkswagen increased its investment in the company by 16% to $5.8 billion on Tuesday.

Fed officials Alberto Musalem and Jeffrey Schmid are scheduled to address the public later today.

On the trading floor, stocks that advanced outnumbered those that declined, with a ratio of 2.35-to-1 on the NYSE and 1.64-to-1 on the Nasdaq.

The S&P 500 registered 23 new 52-week highs and 10 new lows, while the Nasdaq Composite noted 104 new highs and 45 new lows.

Annual price changes for US consumers: https://reut.rs/3YEBXKo