October inflation data came in line with expectations, calming investor nerves. The CPI rose 2.6% year-over-year, snapping six months of declines. Core inflation held steady, suggesting persistent underlying price pressures. This news fueled speculation of a December rate cut, with market probabilities jumping to 79%. US equities rose, Treasury yields and the dollar eased, reflecting a more optimistic outlook.
Rising tensions in the Middle East have sparked fears of an imminent Iranian missile attack on Israel. The potential attack, seen as retaliation for an Israeli airstrike targeting Hezbollah leader Hassan Nasrallah, has prompted the US to boost its military presence and prepare to defend Israel. Markets have reacted strongly, with gold and oil prices surging while stock indices dipped. This situation highlights the volatile geopolitical landscape and its impact on global markets.
US inflation cooled in August to its lowest point in over two years, but core inflation, which excludes volatile food and energy prices, remained persistent. This suggests that the Federal Reserve might take a more cautious approach to interest rate cuts in September, despite initial expectations for a larger reduction.
The S&P 500 saw a noticeable shift in market reactions to Q2 2024 earnings reports. Positive EPS surprises were rewarded more than ever, while negative surprises were met with harsher consequences. This suggests that investors are increasingly focused on profitability in the face of potential revenue growth deceleration and may begin to scrutinize top-line performance more closely moving forward.
Revised US employment data from April 2023 to March 2024 revealed a slower pace of job growth than initially reported. This downward revision has fueled expectations of aggressive Fed rate cuts, impacting the dollar and other markets.
