CPI Countdown: Market on Edge Ahead of Price Data
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Welcome to the Schwab Market Update podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead.

I'm Colette O'Claire, and here's Schwab's early look at the markets for Wednesday, December 11th. Markets are unsettled ahead of the November Consumer Price Index, or CPI, reading, due at 8.30 a.m. Volatility resurfaced this week on geopolitical concerns and worries about U.S. inflation progress.

Analysts expect 0.3% growth in both monthly and core CPI, with core excluding food and energy. Year-over-year core CPI is seen at 3.3%, the same as October's annual rise. This reinforces the Fed's challenge pushing inflation the last mile to its 2% annual goal from the 9% peak of mid-2022.

"We don't expect this to stop the Fed from cutting rates at next week's meeting, especially with the implied probability of a cut at more than 80 percent," said Colin Martin, director, fixed income strategy at the Schwab Center for Financial Research. "The Fed doesn't like to surprise the markets, so it would likely take a very large upside surprise for the Fed to hold rates steady next week."

With inflation proving sticky, we do expect the Fed to pause at one of the early 2025 meetings.

There was some positive news on inflation yesterday, as the final reading on third-quarter unit labor costs rose just 0.8%, below expectations for nearly 2%, and down from the 1.9% preliminary reading. The news didn't seem to have much impact on Treasury yields, which climbed yesterday ahead of CPI. A U.S. three-year Treasury note auction yesterday saw decent demand, but today's 10-year Treasury note auction will be watched.

Tomorrow brings another rate-sensitive report, the November Producer Price Index, or PPI. But that's the final major data point ahead of the Fed gathering. Besides CPI, today brings a rate decision from the Bank of Canada, where odds appear high for a jumbo 50 basis point cut after recent weak data. A European central bank, or ECB, meeting follows Thursday.

Back home, software firm Adobe reports after the close. Adobe beat Wall Street's expectations when it last reported in September, but shares slipped then on soft quarterly guidance. Investors are likely tracking Adobe's digital media segment, which grew 11% the previous quarter. Guidance will also be eye for possible improvement. Semiconductor giant Broadcom reports Thursday.

Major indexes fell for the second straight day Tuesday. The Nasdaq Composite lost steam after an early rally despite a 5% gain for Alphabet, fueled in part by Monday's unveiling of the Willow chip for quantum computing.

Oracle plunged on an earnings disappointment, while the Philadelphia Semiconductor Index continued its volatile path, shedding nearly 3%. Last week's tech rally shows signs of fading, and the cyclical sectors that powered November's gains didn't do much to bridge the gap Monday and Tuesday.

Technically, the S&P 500 index remains well above its 20-day moving average of 5,995, even after the sluggish start this week, with 6,000 a possible support point.

The S&P 500 dropped 17.94 points, or 0.3%, Tuesday to 6,034.91. The Dow Jones Industrial Average shed 154.1 points, or 0.3%, to 44,247.83 and is down four straight sessions. And the Nasdaq Composite fell 49.45 points, or 0.2%, to 19,067.

687.24. This has been the Schwab Market Update podcast. To stay informed, visit schwab.com slash market update or follow for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or review. It really helps new listeners find the show. I'll be back with another update tomorrow.

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