Stocks End Mixed, CPI Inflation Report Due This Morning  Image: Shutterstock Stocks closed mixed to start the week with the Dow up modestly, while the S&P and Nasdaq were down modestly. There was not much in the way of economic reports out yesterday. Although, today (this morning) we'll get the Consumer Price Index (CPI) inflation report.
Inflation has been on the decline ever since it peaked in the summer of 2022. The decline has slowed a bit. And there have been a couple of modest upticks here and there. But by and large, inflation is on the decline. Today's report will be the first of 3 inflation reports we'll get before the next FOMC announcement on December 13. Today's report (retail inflation) is expected to show the headline number up 0.1% m/m vs. last month's 0.4% pace, while the y/y rate is expected to be up 3.3% vs. last month's 3.7%. The core rate (ex-food & energy) is expected to be up 0.3% m/m vs. last month's 0.3% change, while the y/y rate is expected to come in at 4.1%, also the same as last month's 4.1% pace. After that, the next inflation report comes out tomorrow with the Producer Price Index (PPI) (wholesale inflation). And then on November 30, we'll get the Personal Consumption Expenditures (PCE) report, which is the Fed's preferred inflation gauge. The Fed has given strong signals that they may be done with their rate hike cycle. Although, Fed Chair Jerome Powell, threw that into question during a speech last week when he said that he was "not confident" the Fed has done enough to bring inflation down. Specifically, he said, "The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time; we are not confident that we have achieved such a stance." Nonetheless, the Fed has said plenty more to suggest that they could very well be at the end. As such, Fed Funds traders are only putting a 12% chance that they raise rates a quarter point in December, which means an 88% likelihood that they leave rates unchanged yet again. In other news, earnings season continued yesterday with another 654 companies reporting. We won't get as many today with only 224 companies on deck. But we'll hear from plenty of familiar names including Home Depot, Sea Limited, and Tencent Music. Later in the week, the retail names will roll in with Target, TJX, Walmart, Alibaba, and Ross Stores to name a handful. Also this week, Congress needs to pass a funding package before midnight on Friday, November 17. Or at least kick the can down the road some more to avoid a shutdown. But any failure to do so runs the risk of the rating agencies downgrading U.S. government debt. (Quite frankly, even a stopgap measure or an extension would show a continued degree of dysfunction and run the risk of a downgrade as well.) In fact, Moody's on Friday, said it cut its ratings outlook on the U.S. government to negative from stable. While they maintained and affirmed the U.S. rating of Aaa, they were clear in their warning that our debt affordability was weakening, and that continued political polarization is making it harder to address the deficit. So all eyes will be on watching Congress this week in addition to everything else. In the meantime, stocks are up sharply in the last few weeks. And the Q4 rally, after a slow start, is looking quite strong. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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