U.S. Stock Markets Decline, Cautious Sentiment Ahead of CPI Report

U.S. stock index futures and equity markets fell on Wednesday, as the strong post-election rally took a breather ahead of crucial inflation data expected to guide the Federal Reserve’s next monetary policy moves.

Wall Street’s major indexes retreated from record highs on Tuesday as investors held on to some of the recent gains made. The S&P 500 was down 0.3%, the NASDAQ Composite was down 0.1%, while the Dow Jones Industrial Avergae lost 0.9%.

U.S. CPI Data in Focus

The bullish momentum triggered by Donald Trump’s presidential victory has temporarily slowed, as investors anticipate the latest consumer price index (CPI) data. The report is critical, as it could shape the Fed’s approach to interest rates in December.

Trump’s campaign stance on trade and immigration, which emphasized protectionism, has heightened expectations for inflationary pressures in the long term. Analysts forecast headline CPI to increase to 2.6% year-over-year in October, up from 2.4% in September, while monthly price growth is expected to remain steady at 0.2%.

The core CPI, excluding volatile items like food and energy, is projected to remain stable at 3.3% year-over-year and 0.3% month-over-month, mirroring September’s levels.

On Tuesday, Minneapolis Fed President Neel Kashkari suggested that an uptick in inflation could influence the central bank’s decision to maintain interest rates in December. Meanwhile, Richmond Fed President Thomas Barkin expressed readiness to adjust policy if inflation showed renewed momentum.

Traders currently assign a 59.8% probability to a 25-basis-point Fed rate cut in December, while 40.2% expect rates to remain unchanged, according to CME FedWatch. This follows the Fed’s 25-basis-point rate cut last week and its continued reliance on inflation trends for future decisions.

Corporate Highlights: Rivian and Spotify Outperform

In corporate news, Rivian Automotive (RIVN) shares surged by 14% in premarket trading following an announcement of increased investment from Volkswagen (VOWG) in their joint venture for electric vehicles.

Spotify Technology (SPOT) gained nearly 6%, buoyed by robust subscriber growth in the September quarter and a positive forecast for the full year.

CAVA Group (CAVA) rallied almost 17% after reporting strong third-quarter results that exceeded both revenue and profit expectations.

Conversely, Skyworks Solutions (SWKS) declined by 6% after issuing weaker-than-expected first-quarter guidance, weighing on sentiment for the semiconductor sector.

Oil Prices Rebound Slightly

Oil prices staged a modest recovery on Wednesday, rebounding from their lowest levels in two weeks. This came after the Organization of the Petroleum Exporting Countries (OPEC) lowered its global oil demand growth forecasts for 2024 and 2025, citing economic challenges in China, the world’s largest crude importer.

Looking ahead, the International Energy Agency (IEA) is set to release its updated oil market forecast on Thursday, which could further influence crude prices.