CPI Test Looms as Fed Split Widens

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CPI Test Looms as Fed Split Widens

S&P 5007,549.94+2.35%

US 10Y Treasury4.88%+2 bp

WTI Crude85.89-1.11%

Gold4,084.20-0.74%

Market Snapshot

Asset	Level	Change
S&P 500	7,549.94	+2.35%
Nasdaq 100	27,907.63	+3.40%
Dow Jones	52,389.75	+2.15%
Russell 2000	2,840.81	+3.15%
USD/JPY	158.17	-0.08%
EUR/USD	1.12	+0.69%
GBP/USD	1.34	+0.50%
Gold	4,084.20	-0.74%
WTI Crude	85.89	-1.11%
Bitcoin	74,197.10	-1.36%
US 2Y Treasury	4.56%	+5 bp
US 10Y Treasury	4.88%	+2 bp

Prior Economic Events

Data	Prior	Cons	Actual
Speech by Fed's Bowman	-	-	-
Fed Goolsbee Speech	-	-	-
Speech by Fed's Barkin	-	-	-
Speech by Fed's Bowman	-	-	-
Fed Goolsbee Speech	-	-	-
Speech by Fed's Waller	-	-	-

Today's Economic Events

Data	Prior	Cons	Time
ADP Employment Change Weekly	16,750	-	08:15
Core Inflation Rate Month-over-Month	0.30	0.20	08:30
Inflation Rate Month-over-Month	0.60	0.30	08:30
CPI s.a	336.30	-	08:30
Consumer Price Index	336.94	337.02	08:30
Speech by Fed's Logan	-	-	09:35
Eia Short-Term Energy Outlook	-	-	12:00
Speech by Fed's Bowman	-	-	13:30
Speech by Fed's Schmid	-	-	13:30
API Weekly Crude Oil Stocks	-5.3m	-	16:30

October CPI lands at 08:30 ET with consensus at +0.3% headline and +0.2% core m/m, a critical input for the December 9 FOMC after September's 0.6% headline jump
Fed Governor Waller has floated a 50 bp hike if inflation fails to slow, while Goolsbee warns the AI data center buildout is "overheating" the economy
Equities ripped higher Monday (Nasdaq +3.40%, Russell +3.15%) even as the 2-year yield rose 5 bp to 4.56% and the dollar softened — an unusual risk-on/rates-up mix

Yesterday's Recap

Monday's session was dominated by Fed communications rather than hard data, with Bowman, Goolsbee and Barkin all on the tape. Governor Waller's remarks drew the sharpest market reaction: he said he would support a 25 bp hike in December and argued policymakers should weigh a 50 bp move if inflation fails to slow — the largest increase since 2022. Chicago Fed President Goolsbee countered that the AI data center buildout is "overheating" the economy, a notably hawkish framing from a typically dovish voice.

Despite the hawkish tone, equities staged a broad rally: the S&P 500 gained 2.35% to 7,549.94, the Nasdaq 100 surged 3.40% to 27,907.63, and the Russell 2000 added 3.15%. Rates moved the other way, with the 2-year yield up 5 bp to 4.56% and the 10-year up 2 bp to 4.88%, steepening the curve modestly. The dollar softened against major crosses (EUR/USD +0.69% to 1.12), while gold fell 0.74% to $4,084.20 and WTI slipped 1.11% to $85.89.

The Day Ahead

All eyes are on the 08:30 ET October CPI release, with consensus at +0.3% headline m/m (down from 0.6%) and +0.2% core m/m (down from 0.3%); the index level is expected at 337.02 versus 336.94 prior. A hot core print would validate Waller's call for a larger hike and likely pressure front-end rates. ADP's weekly employment change (08:15 ET) offers an early labor-market read, though its signal value is limited.

Fed speakers populate the afternoon: Logan at 09:35 ET, then Bowman and Schmid together at 13:30 ET, giving markets multiple chances to recalibrate December expectations. The EIA Short-Term Energy Outlook at 12:00 ET will be watched for updated crude demand assumptions after Monday's oil selloff.

Other Economic Notes

The macro backdrop remains uncomfortably strong for the Fed: Q3 GDP grew 3.40% annualized, retail sales are running 6.29% y/y, and unemployment sits at just 4.10% — hardly conditions that argue for easing. September CPI at 3.70% y/y remains well above target, and the 0.6% m/m headline print that month is the key reason December hike odds have firmed. ↓ p.2

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Other Economic Notes (continued)

Corporate earnings are beating estimates but by the narrowest margin in roughly four years, suggesting margin pressure is building even as top-line demand holds. The combination of firm growth and sticky inflation keeps the "higher for longer" regime intact, with the 10-year at 4.88% reflecting term premium rather than growth optimism.

Global Macro News

France's central bank expects the country to dodge a year-end recession, and Q3 unemployment eased slightly — a modest reprieve for an economy still contending with protests and fiscal strain. Canada's 2026 federal budget spends heavily to spur productivity, while Canadian business leaders now cite tighter monetary policy among the top risks to their economy, a reminder that restrictive conditions are biting north of the border too. The US extended its trade probe into Vietnam's intellectual property protections by three months, keeping tariff uncertainty alive for supply chains.

In Nigeria, the naira gained 6.3% against the dollar over the past year as reserves held above $55bn, though momentum has cooled recently. Asian equities rose overnight tracking Wall Street's tech-led advance, with traders positioning ahead of the US CPI print.

Fed Watch

The Fed has held at 4.00% (target range 3.75-4.00%) since the October 28 decision, following a 25 bp hike at the September 16 meeting. The December 9 FOMC is now genuinely live: Waller's explicit backing for a 25 bp December increase, plus his openness to 50 bp if inflation disappoints, marks a meaningful hawkish escalation. ↓ p.3

Continuation

Fed Watch (continued)

Goolsbee's "overheating" comment about data centers adds an unusual supply-side dimension to the debate — capex-driven demand growth that may not respond to rate hikes. With the committee's vote split undisclosed in current communications, the market is left to infer consensus from individual speeches. For markets, the key implication is that a hot CPI print today could pull forward a larger hike, steepening the curve further and supporting the dollar; a soft core print would validate the hold camp and likely rally front-end Treasuries.

QT continues in the background, draining reserves and adding to term premium at the long end.

US Macro Daily(Beta Mode)