CPI report came in hotter than expected, how does it affect the stock market

The Consumer Price Index (CPI), which tracks the costs of goods and services across the U.S. economy, rose by a seasonally adjusted 0.2% for the month. The Consumer Price Index (CPI) report can significantly affect the stock market, as it provides insights into inflation trends, which in turn influence investor sentiment, Federal Reserve policy, and overall economic conditions.

The Consumer Price Index (CPI), which tracks the costs of goods and services across the U.S. economy, rose by a seasonally adjusted 0.2% for the month. This brought the annual inflation rate to 2.4%, with both figures coming in 0.1 percentage point higher than the Dow Jones consensus forecast.

Inflation falls to 2.4%

The Consumer Price Index rose 2.4% in the 12-month period that ended in September, while a gauge that strips out food and energy prices was 3.3%, the government said Thursday.

The central bank cut interest rates by a half-percentage point last month—the first time officials lowered rates since 2020—with the intention to protect the job market that looked to be wobbling.

Some Fed officials are still wary about inflation getting stuck below the Fed's 2% target and keeping a close watch on the housing category that has remained firm.

A separate report on Thursday revealed that weekly jobless claims reached a 14-month high, signaling possible weakness in the labor market despite a significant increase in nonfarm payrolls in September. However, much of this rise is likely linked to disruptions from the hurricane and the strike.

The Bureau of Labor Statistics noted that more than three-quarters of the inflation increase was driven by a 0.4% rise in food prices and a 0.2% increase in shelter costs, which helped offset a 1.9% drop in energy prices.

Other contributors to the inflation gain included a 0.3% rise in used vehicle prices, a 0.2% increase in new vehicle prices, a 0.7% uptick in medical care services, and a 1.1% surge in apparel costs.

Dow, S&P 500 jump to fresh records as key CPI report looms

U.S. stocks surged on Wednesday, with two major indexes reaching new record highs. Investors balanced concerns over a potential breakup of Google while analyzing the minutes from the Federal Reserve’s latest meeting and awaiting the upcoming consumer inflation report.

The Nasdaq Composite gained 0.6%, while the S&P 500 climbed about 0.7%. The Dow Jones Industrial Average saw a jump of more than 1%, or nearly 450 points. Both the Dow and S&P 500 closed at record highs, with the S&P approaching its next milestone: 5,800.

Stocks have whipsawed this week amid intense debate over the state of the economy now the Fed has finally eased up on policy. Its decision to cut by a jumbo 50 basis points raised concerns it might see risks the market could not. That has investors wondering about a "no landing," where the economy keeps growing and inflation risks once again emerge.

Meanwhile, investors absorbed news that the DOJ is considering asking a judge to force Google to sell off key businesses to remedy its monopoly position. Shares of owner Alphabet (GOOG) slipped in early trading, after rising in a broader tech rebound that fueled Tuesday's solid gains.

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