U.S. Stock Markets Retreat Slightly After Reaching All-Time Highs, CPI Report Awaited

U.S. stocs and stock index futures were marginally lower on Tuesday as markets stabilized in anticipation of key inflation data. This comes after Wall Street experienced a record-breaking rally fueled by optimism following Donald Trump’s election victory. Investors appeared cautious, seeking further clarity on what a second Trump presidency might mean for economic policy.

Wall Street Hits New Records but Momentum Slows

The major indexes on Wall Street touched historic highs on Monday. The S&P 500 closed above 6,000 points for the first time in history, gaining 0.1%. The NASDAQ Composite rose by the same percentage, while the Dow Jones Industrial Average outperformed, climbing 0.7%. Despite these milestones, the pace of gains showed signs of cooling as traders awaited more insights into the economic implications of Trump’s return to the White House.

Focus on CPI Data and Federal Reserve Commentary

Investors are keenly awaiting Wednesday’s release of the Consumer Price Index (CPI) inflation data. October’s inflation is expected to show minimal change from the previous month, reflecting ongoing strength in the U.S. economy. However, any unexpected uptick in inflation could disrupt the Federal Reserve’s plans to continue easing interest rates.

Last week, the Fed lowered rates by 25 basis points and emphasized a data-driven approach to further policy decisions. Stubborn inflationary pressures have cast doubt on how much the Fed will ease rates moving forward. Market participants, as per CME FedWatch, assign a 70.7% probability to another 25-basis-point cut in December, with the remaining 29.3% favoring a hold on rates.

Further guidance is expected from Fed officials, including Governor Christopher Waller and Richmond Fed President Thomas Barkin, both scheduled to speak on Tuesday.

Earnings Spotlight: Home Depot, Shopify, and Spotify

As the corporate earnings season nears its end, a few key players are set to report their quarterly results.

• Home Depot (HD): Investors will watch the DIY retailer’s earnings closely to gauge whether cost-of-living pressures have dampened spending on home improvement projects.
• Shopify (SHOP): The e-commerce platform will release its Q3 results, following upbeat sales projections last quarter driven by demand for its AI-enhanced tools for small and medium businesses.
• Spotify (SPOT): The Swedish audio streaming service is set to report its earnings after the market closes. The company, which has implemented cost-saving measures such as workforce reductions and budget cuts, posted strong profits in the previous quarter.

Oil Prices Stabilize After Recent Declines

Oil prices edged higher on Tuesday, recovering slightly from recent losses linked to underwhelming stimulus efforts by China. The Chinese government recently announced a 10 trillion yuan ($1.4 trillion) debt package aimed at easing local government funding strains. However, the plan is unlikely to directly bolster economic growth, disappointing global markets.

In the U.S., fears of supply disruptions eased as tropical storm Rafael dissipated in the Gulf of Mexico, reducing the risk of interruptions to oil production in the region.

The cautious tone in equity markets and the anticipation surrounding inflation data highlight the delicate balance investors are navigating. With the Federal Reserve’s policy direction and corporate earnings providing critical signals, this week’s developments will likely set the tone for markets heading into year-end.