Select Page

It’s likely to be days, weeks, months–if we have to wait from a December runoff vote in the Georgia Senate race–before we know who controls what house of Congress and by how many seats.

In the meantime, tomorrow, November 10, brings the October CPI inflation report from the Bureau of Labor Statistics.

I’d expect the report to move stocks as investors try to “guess” how many more interest rate increases to expect from the Federal Reserve. And when the Fed might pause its policy of interest rate increases or even pivot to cutting interest rates.

Economists surveyed by the Wall Street Journal expect that headline CPI inflation will increase by 0.6% in October from a 0.4% increase in September. They put the annual rate at 7.9%, down from an 8.2% annual rate in September. The core rate, which excludes volatile food and energy prices, is expected to drop to an annual 6.5% from 6.6% in September.

That would be progress toward the Fed’s goal of a 2% annual inflation rate, but very, very slow progress.

And since this is just a forecast there’s a distinct possibility of a surprise, either higher or lower.

Right now the Cleveland Federal Reserve Bank, which calculates an “Inflation Now” reading that is more timely than the surveys from the Bureau of Labor Statistics, represents a nasty negative surprise. The Cleveland Fed is forecasting that headline CPI will rise at a 0.76% month-over-month rate. That’s substantially higher than the 0.6% month-over-month rate from the Wall Street Journal economists. It would, in fact, be the highest month-over-month rate since the June peak of annual inflation at slightly above 9%.

This I think gives investors a strong sense of how uncertain tomorrow’s CPI inflation number is. And it explains why stocks sold off today: No one wants to be in front of that inflation number if it is a negative surprise.

At the close today, November 9, the Stanard & Poor’s 500 was down 2.08%. The Dow Jones Industrial Average was lower by 1.95%. The NASDAQ Com opposite had lost 2.48% and the NASDAQ 100 was off 2.37%. The small-cap Russell 2000 had dropped 2.68%.