Dow, S&P, Nasdaq mixed after October retail inflation bolsters December rate-cut bets

U.S. stocks turned mostly higher Wednesday after investors were handed an October retail inflation report that supported views for another rate cut by the Federal Reserve next month.

The major indexes were coming off Tuesday’s session that snapped post-Election Day win streaks for the S&P 500 (SP500) and the Nasdaq Composite. Investors displayed caution heading into Wednesday’s Consumer Price Index report that eventually revealed in-line figures from the inflation front.

The S&P 500 (SP500) +0.1%, the Nasdaq Composite (COMP:IND) was -0.1%, and the Dow (DJI) +0.4%. Amazon (AMZN) paced blue-chip advancers, while Boeing (BA) led decliners.

The consumer price index met expectations with a headline 0.2% M/M rise in October and a 2.6% Y/Y increase. Core CPI was up 0.3% M/M and at +3.3% Y/Y.

Treasury yields turned lower after the report following their jump in the previous session. The 10-year Treasury yield (US10Y) was down 1 basis point at 4.42%. The 2-year yield (US2Y) fell 7 basis points to 4.27%.

“Lower gas prices were the biggest piece of good news again in the October CPI report. In the other direction, shelter inflation was sticky and unchanged in year-over-year terms,” Bill Adams, chief economist at Comerica Bank, said in a note.

As inflation is not far from the Fed’s 2% target, the data flow is fairly consistent with the Federal Open Market Committee cutting interest rates next month, Adams said. Traders in the fed funds futures market pushed up odds of a cut sized at 25 basis points to 82.5% from 58.7% a day ago, according to the CME FedWatch Tool.

“The Fed’s policymakers are surely thinking hard about how the next administration’s tax, immigration, and tariff policies will affect the outlook for inflation and the job market,” Adams said. “But before those policies are formally enacted, it is hard for the Fed to justify a reaction to them.”

The Fed jumpstarted its rate-easing cycle in September with a cut of 50 basis points, followed by a quarter-point reduction in November to 4.5%-4.75%.

“Inflation is headed in the right direction,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told Bloomberg Television on Wednesday.