S&P 500 futures dip after strong run as inflation data looms

What’s driving markets

The S&P 500 has jumped 7.2% over the past two weeks, helped by benchmark borrowing costs
BX:TMUBMUSD10Y
falling swiftly from 16-year highs on hopes that recent softer jobs data means inflation can ease further and the Federal Reserve has thus finished its campaign of interest rate rises.

However, after that strong rally a more cautious tone prevails at the start of the new week as the market awaits a U.S. consumer price index report for October, due Tuesday, that thus has the heft to underpin the latest bull run or bring it to a halt.

Core CPI growth — which strips out volatile items such as food and energy — is expected to remain steady at 0.3% month-on-month.

“The consumer price index stands as the focal point for investors this week, with anticipation building for the next market-moving event,” said Stephen Innes, managing partner at SPI Asset Management.

The producer prices report for October will be published on Wednesday.

Adding to the reticent mood early Monday was anxiety about another looming U.S. budget deadline — an issue that contributed to Moody’s Investors Service late Friday cutting its outlook on the U.S. sovereign credit rating to negative from stable.

“This week, we will plunge back into the U.S. political saga, as the government short-term funding deadline is due 17th of November and not much progress has been made to seal a fresh deal,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“Depending on the new funding resolution – or the lack thereof – we could see the U.S. 10-year yield return above 4.80%,” Ozkardeskaya added.

Investors will also be keeping an eye out for a slew of earnings reports from retailers, including Home Depot
HD,
+1.29%
on Tuesday, Target
TGT,
+1.44%
on Wednesday and Walmart
WMT,
+1.38%
on Thursday. Their comments on the health of the consumer may also play into thinking on the Fed.

Indeed, the earnings season in general should have provided fundamental support to investor sentiment, according to analysts. “For Q3 2023, with 92% of S&P 500 companies reporting actual results, 81%…have reported a positive earnings per share surprise and 61%…have reported a positive revenue surprise,” said John Butters, senior earnings analyst at Factset.

The U.S. federal budget update for October will be published at 2 p.m. Eastern. Fed Governor Lisa Cook will deliver opening remarks at a Fed conference at 8:50 a.m.