Tuesday, December 10, 2024

Market indexes spent most of the day riding flat trading levels after a mixed pre-market brought the positive Nasdaq and S&P 500 down and the Dow and small-cap Russell 2000 up by late morning. By an hour and a half before the closing bell, all major indexes were negative or heading there.

By the closing bell, the Dow was down -154 points, -0.35%, the S&P -17 points, -0.30%, the Nasdaq -49 points, -0.25% and the Russell -10, -0.45%. All indexes but the Nasdaq are in the red over the past five trading days. Since Election Day, these indexes are all off their highs but from +4.7% (S&P) to +7.3% (Nasdaq). Market participants will be excused from taking a break this past week.
 

What to Expect from the Stock Market on Wednesday: CPI and More

Part of the reason for this rolling off of all-time high market levels is because Wednesday morning brings us November Consumer Price Index (CPI) numbers. These are expected to come in at +0.3% month over month on both headline and core (stripping out volatile food and energy prices).

Year over year CPI is also known as the Inflation Rate, and this is expected to move in the wrong direction: +2.7% versus +2.6% reported last month. This would obviously not be catastrophic to the markets, but it is still more than half a point above what the Fed considers optimum inflation levels of +2.0%. The core CPI year over year is expected to come in flat with October at +3.3% — still notably above those optimal inflation levels.

Recent lows on core CPI year over was +3.2% back in July, which hadn’t been this low since April 2021, when these prints were going hastily in the opposite direction. Thus far, the “soft landing” narrative remains in play, but as we have said in this space numerous times: sometimes achieving a soft landing means you need to stay in the plane a bit longer.

So long as these metrics come within a particular range tomorrow morning, we don’t expect CPI figures to impede the planned 25 basis-point (bps) cut next week, to a Fed funds rate of 4.25-4.50%. That would be a range interest rates haven’t been in since January of 2023, and 100 bps lower than the year we recently spent between 5.25-5.50%, which was the highest rate since the year 2000.

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