US stocks experienced a mixed performance on Wednesday as investors reacted to new consumer inflation data, which appears to support the Federal Reserve's plans for another interest rate cut next month. The Dow Jones Industrial Average saw a slight increase, while the S&P 500 and Nasdaq Composite faced minor declines after an initial rise.
The Consumer Price Index (CPI) for October showed a year-over-year increase of 2.6%, matching economists' predictions. Month-over-month, the CPI rose by 0.2%, consistent with the previous month’s performance. Core inflation, which excludes food and energy prices, also met estimates with a 3.3% increase year-over-year and a 0.3% rise month-over-month.
Following the inflation report, the stock market displayed mixed signals. The Dow Jones Industrial Average opened about 0.2% higher, recovering from a previous decline. However, both the S&P 500 and Nasdaq Composite saw slight decreases, reflecting investor caution amid ongoing inflation concerns.
The inflation data is crucial for the Federal Reserve as it prepares for its next meeting. Minneapolis Fed President Neel Kashkari emphasized that inflation trends will be a key focus, stating that any unexpected rise in inflation could lead to a reassessment of rate cut plans. Currently, traders are pricing in an 80% chance of a 25 basis point rate cut in December, up from just under 60% earlier in the week.
Food inflation remains a significant concern, with grocery prices climbing 1.1% year-over-year. The overall food category saw a 2.1% increase, driven by a 3.8% rise in dining out costs. Notably, egg prices surged by 30.4% year-over-year, although they experienced a 6.4% decline month-over-month.
As the market digests the latest inflation data, the focus remains on the Federal Reserve's upcoming decisions regarding interest rates. With inflation showing signs of stability, investors are keenly watching for any shifts in policy that could impact the economy and the stock market in the coming months.
The TSX composite index rises to a seven-week high as the Federal Reserve's positive economic outlook boosts investor confidence, while the Bank of Canada cuts interest rates to support the economy.
European shares rebounded as the tech selloff eased, with retail stocks leading the gains. The STOXX 600 index closed at a record high, reflecting renewed investor confidence.
Italy's government supports Banca Monte dei Paschi's bid for Mediobanca, aiming to strengthen the banking sector and enhance the economy.
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