Stock Market Today: Markets Take CPI Report in Stride Ahead of Fed Meeting

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published 12 December 2023

Market participants awaiting the conclusion of tomorrow's Fed meeting took a slightly disappointing reading on inflation in stride Tuesday, sending all three major benchmarks to new 52-week intraday highs.

Although the November CPI report essentially matched estimates, underlying stickiness in the shelter and services components suggests the central bank won't pivot to rate cuts as soon as traders had hoped.

The central bank's rate-setting group, the Federal Open Market Committee (FOMC), wraps up the next Fed meeting on Wednesday, and it is widely expected to keep the short-term federal funds rate unchanged at a 22-year high.

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What market participants really want to know is when the Fed will pivot to rate cuts – and the latest CPI report suggests they'll have to wait longer than they thought.

Interest rate traders now assign a 42% probability to the Fed enacting its first quarter-point rate cut in March, down from 54% a week ago, according to CME Group's FedWatch Tool. Meanwhile, the odds of a first quarter-point cut in May rose to 50% from 41% a week ago.

"The CPI report sets up an interesting start to 2024," says Stephen Kolano, chief investment officer at Integrated Partners. "A major tug of war in the first part of the year is going to be market expectations for rate cuts early vs Fed posturing on inflation remaining higher than target and needing to keep rates higher for longer. I do think the market may be a bit ahead of itself with any chance of rate cuts as early as March."

Oracle sinks on outlook

In single-stock news, Oracle (ORCL) tumbled 12.5% after the tech giant reported fiscal second-quarter revenue and quarterly revenue guidance that fell short of analysts' estimates late Monday.

The company's downbeat sales forecast for its cloud computing business – which competes with heavyweights Amazon.com's (AMZN) Amazon Web Services and Azure from Microsoft (MSFT), a highly rated Dow Jones stock – continues a trend of slowing top-line growth.

Tuesday's selloff in ORLC stock wiped out about $39 billion in market capitalization. For context, that's more than the entire market value of Electronic Arts (EA).

Elsewhere, shares in Hasbro (HAS) retreated after the toy manufacturer said it's cutting almost a fifth of its workers because of weak sales of toys and games this holiday sales season.

Lastly, Warren Buffett’s Berkshire Hathaway (BRK.B) cut its stake in HP (HPQ) by almost half over the past two months, according to regulatory filings. HP has been a part of the Berkshire Hathaway portfolio since Buffett initiated a stake in early 2022.

As for the major indexes, the Dow Jones Industrial Average added 0.5% to 36,577, the S&P 500 rose 0.5% to 4,643, and the Nasdaq Composite gained 0.7% to 14,533.

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Dan Burrows is Kiplinger's senior investing writer, having joined the publication full time in 2016.

A long-time financial journalist, Dan is a veteran of MarketWatch, CBS MoneyWatch, SmartMoney, InvestorPlace, DailyFinance and other tier 1 national publications. He has written for The Wall Street Journal, Bloomberg and Consumer Reports and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among many other outlets. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about markets and macroeconomics.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade individual stocks or securities. He is eternally long the U.S equity market, primarily through tax-advantaged accounts.