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.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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.
Related content
- November CPI Report: What the Experts Are Saying About Inflation
- Rising Prices: Which Goods and Services Are Driving Inflation?
- The Earnings Recession Is Over
-
The Power of Compound Interest: How to Turn Small Investments Into Big WealthThe key is understanding how it works and how to maximize its potential to build financial security.
-
How to Create a Family Dynasty for Lasting SecurityThe super-rich rely on the family dynasty model to pass assets down from generation to generation. Here's how to embrace those strategies.
-
Stock Market Today: Dow Adds 353 Points Despite Soft Retail SalesInvestors and traders shake off another set of shaky economic numbers and send 10 of 11 sectors higher on Monday.
-
Nvidia Stock's Been Growing for Years. Just Look At Its 100,000% ReturnNvidia shareholders have had to stomach intense volatility over the years, but they have come out on top thanks to the AI chipmaker's bellwether status.
-
It's No Surprise That Berkshire Hathaway's in the 100,000% Return ClubWarren Buffett's fascination with the insurance industry has helped Berkshire Hathaway's stock return snowball.
-
Stock Market Today: Dow Jumps 674 Points in Friday's Relief RallyThe gains weren't limited to stocks, though, with gold futures closing above the $3,000 per ounce mark for the first time.
-
Stock Market Today: Stocks Drop on Trump's EU Tariff ThreatsThe White House said alcohol imports from the European Union could soon face tariffs of 200%.
-
Stock Market Today: Nasdaq Shines In Volatile SessionIt was another up-and-down day for stocks as market participants weighed encouraging inflation data against the latest tariff headlines.
-
Stock Market Today: Trump Drives Another Up-and-Down DayInvestors, traders and speculators as well as businesses and households continue to adjust to rapidly changing times.
-
Stock Market Today: Dow Off 890 Points on Tariff UncertaintyPresident Donald Trump still believes his ever-evolving plan for global trade will be "great for us," but "it takes a little time."
