By US stocks ticked higher on Wednesday as traders took in fresh inflation figures, which were in line with economists’ expectations. Major indexes edged up in early-morning trading, while bond yields slumped.
Consumer prices grew 0.2% in the month of October and 2.6% on a year-over-year basis. The increase was slightly hotter than last month’s 2.4% price growth, but in line with expectations, which kept investors hopeful that the Federal Reserve will cut interest rates at its December meeting.
Expectations for another 25 basis point rate cut in December solidified. Markets are pricing in a 82% chance the Fed will trim its target rate by another quarter-point, up from a 59% yesterday, according to the CME FedWatch tool.
“Given nervousness around the more inflationary aspects of Trump’s policy proposals, markets appeared primed for an upside inflation surprise today,” Seema Shah, the chief global strategist at Principal Asset Management, said in a note. “A December cut is still in the cards,” she added.
Still, the rise in the overall inflation rate makes the outlook for future Fed cuts uncertain, according to Skyler Weinand, the chief investment officer of Regan Capital.
“With Wednesday’s CPI in line with expectations, but still stubbornly above the Fed’s 2% goal, the Fed may have only one rate cut left in December before taking a pause from their easing path,” Weinand said in a note.
He continued: “The incredible move in the stock market postelection has effectively eased financial conditions for stock investors. This easing, combined with incoming fiscal stimulus, may warrant a pause on rate cuts by the Fed in the near future to allow the dust to settle and to process more incoming data.”
Assets that are part of the Trump Trade appeared to remain in-focus on Wednesday, with shares of Tesla rising as much as 3% while Dogecoin climbed 4% after Elon Musk was appointed to co-head Trump’s newly created Department of Government Efficiency, along with entrepreneur Vivek Ramaswamy.
Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Wednesday:
- S&P 500: 5,988.06, up 0.07%
- Dow Jones Industrial Average: 43,988.08, up 0.18% (+77.10 points)
- Nasdaq composite: 19,285.65, up 0.03%
Here’s what else is going on:
- Stock exposure is at an 11-year high after the election as investors see US stocks as the top-performing asset next year, BofA said.
- The biggest risk to stocks after Trump’s election victory is China’s reaction to a trade war, according to one research firm.
- Dogecoin surpassed Ford in value as Trump’s election win propelled the total crypto market cap to $3 trillion.
- Here are 3 risks that could derail the Trump trade in stocks, according to Morgan Stanley.
In commodities, bonds, and crypto:
- West Texas Intermediate crude oil declined 1.07% to $67.39 a barrel. Brent crude, the international benchmark, was lower by 0.92% to $71.23 a barrel.
- Gold edged up 0.61% to $2,612.10 an ounce.
- The 10-year Treasury yield dropped six basis points to 4.365%.
- Bitcoin climbed 4.29% to $89,642.
