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The consumer price index rose 0.4% in October from September, more than a Dow Jones consensus estimate of a 0.3% increase. CME Group's FedWatch tool shows an 11% chance of a 50 basis-point hike in December, up from zero a week ago, and expectations for a quarter-point increase stand at 88%, up from 77%. The benchmark 10-year Treasury yield rose nearly 10 basis points to 4.95%.
Summary by WaZii, written by AI
Goldman Sachs now expects 25 basis-point Fed hikes in December 2026 and March 2027, adding a third hike to the cycle after a third straight month of hot inflation, and has pushed its first rate cut to December 2027. The bank says the March move could come in January but March is slightly more likely, and it expects most FOMC members to signal a third hike in the December dot plot. It still sees inflation meaningfully lower by end-2027 as tariff, energy and AI pressures fade.
Summary by WaZii, written by AI
Hotter-than-expected CPI data sent the Nasdaq Composite down 0.7% and the S&P 500 down 0.4%, and lifted the 10-year Treasury yield by over 10 basis points back toward the 5.00% area. CME Fed funds futures price a 91% chance of a 25 basis-point December tightening and a 9% chance of a 50 basis-point hike. Nvidia fell 5.5% and is now down over 30% from its October highs, while CoreWeave rose 5.6% after its results.
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Ludovic Subran, chief investment officer and chief economist at Allianz, said he was not surprised by the latest US inflation print and that markets are underestimating a second inflation shock. He pointed to energy pass-through including diesel refining, food inflation and AI-related inflation, and said markets are now pricing three Fed hikes. Chicago Fed President Austan Goolsbee called the report "distressing" and said officials will have to deal with price pressures.
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Baird downgraded Nvidia to neutral from outperform, citing delayed 2027 data center forecasts, supply issues and uncertainty related to CEO tenure. UBS reiterated Apple as neutral, saying its data tracking iPhone availability across 30+ geographies show wait times continuing to trend lower. Goldman Sachs reiterated CoreWeave as buy after its earnings, while Morgan Stanley reiterated Nvidia as overweight but removed it as a top idea, and Piper Sandler upgraded Alpha Tau Medical to overweight from neutral.
Summary by WaZii, written by AI
Core consumer prices rose 0.3% from a month earlier, topping estimates for a third straight month, while overall prices jumped 0.4%, according to Bureau of Labor Statistics data. The S&P 500 halted back-to-back gains and two-year Treasury yields jumped 18 basis points to 4.74%. Fed Governor Christopher Waller said he backed a December rate hike and would support a half-percentage-point increase if inflation keeps accelerating, while Dallas Fed President Lorie Logan said she still sees the need for at least two quarter-point increases.
Summary by WaZii, written by AI
Dallas Fed President Lorie Logan said it is clear the Fed needs at least two more quarter-percentage-point rate increases, and that it may be possible to raise rates more rapidly this winter than the central bank has moved so far. She said that after two more hikes it would make sense to pause and assess what further action may be appropriate, and that the Fed policy rate is at least 50 basis points below a modestly restrictive level. She also said excess inflation is unacceptable and that higher-than-expected CPI raises concern that PCE inflation could rise.
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DataTrek Research co-founder Nicholas Colas argues that falling stock prices and rising volatility are already doing part of what higher interest rates are meant to do by restraining financial conditions. He notes futures markets now assign a 68% probability to no more than one rate hike during 2027, up from 57% a week earlier. Traders expect the Fed to hold rates steady through at least the first quarter of next year.
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CoreWeave beat revenue expectations in the third quarter and raised its full-year guidance, with shares swinging in extended trading after initially rising. Mercury Systems fell almost 3% postmarket even after earning 52 cents a share in its fiscal first quarter, above the 33-cent highest estimate among 13 analysts polled by FactSet, on revenue of $253.2 million versus a highest estimate of $246.2 million. Grocery Outlet dropped 8% after mixed third-quarter results, with revenue of $1.18 billion and adjusted earnings per share of 16 cents.
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Treasury yields across the curve fell to their lowest since September last week after a Democratic sweep in the midterms led to a selloff in technology stocks, and the 10-year yield ticked up to 4.88% on Monday as equities stabilized. Economists expect October consumer prices to have risen 0.3% from a month earlier, down from the prior headline print of 0.6% for September. The interest-rate swap market is pricing in more than an 80% chance of a quarter-point increase at the December Fed meeting.
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Fed Governor Christopher Waller said interest rates need to rise to put downward pressure on inflation and that policy has not been nearly as restrictive as he thought. He said a 0.3% monthly October CPI reading would suggest inflation moving away from target and require more aggressive policy action, and that real rates have to rise. The dollar index traded around 101.70, up 0.05% on Tuesday, after his remarks.
Summary by WaZii, written by AI