The upcoming release of the U.S. October Consumer Price Index (CPI) data is expected to emphasize the complex journey of reducing inflation to meet the Federal Reserve's target. The data's publication is scheduled for this week. Current market expectations suggest that the core CPI's year-on-year and month-on-month increases for October will mirror those of September. Overall, the CPI may rise for the fourth consecutive month by 0.2% month-on-month, with an anticipated acceleration in the year-on-year increase for the first time since March.
Economists from Wells Fargo noted that achieving inflation targets will be challenging, especially excluding volatile energy and food prices. Core goods prices might rise again in October, partly due to increased demand for vehicles and parts following recent hurricanes, which also elevated service sector prices as more people stayed in hotels.
Minneapolis Fed President Neel Kashkari recently stated that although the Federal Reserve is making progress on controlling inflation, the U.S. economy remains robust. However, there is still work to do. The strong economy and higher productivity growth may result in smaller interest rate cuts than anticipated in the coming months. Nonetheless, Kashkari maintained the possibility of another rate cut in December.
Bloomberg Economics projects an increase in both the October CPI and Producer Price Index (PPI), which could raise long-term yields and further suppress economic growth in the coming months. They predict the unemployment rate will continue to climb, reaching 4.5% by the year's end.
The October PPI will be released shortly after the CPI, possibly showing growth after a stagnant September. Additionally, retail sales data could also demonstrate significant growth. This week will feature several Federal Reserve speeches, including ones by Chair Jerome Powell and other regional bank presidents.
Investors are particularly interested in upcoming earnings reports from companies like Home Depot (HD, Financial) and Disney (DIS). Home Depot is scheduled to release its third-quarter earnings early in the week. Analysts expect sales of $39.24 billion and earnings per share of $3.64. The company's outlook on the real estate market is crucial, as rising long-term bond yields have increased mortgage rates, potentially offsetting gains from a strong housing market.
Disney is set to report its earnings later in the week, focusing on its experiences segment, which includes theme parks and related operations. This sector has been weak recently due to hurricane-induced closures and consumer inflation fatigue. However, Disney's direct-to-consumer segment might show improved performance due to increased profitability. The market anticipates a fourth-quarter sales figure of $22.44 billion and earnings per share of $1.10.
